A well-structured 401(k) plan is essential for attracting and retaining top talent while ensuring employees have a strong financial future. However, to maximize its benefits, employers must regularly benchmark their plan against industry standards. Benchmarking helps assess plan performance, costs, and participant engagement, ensuring it remains competitive and compliant.
What Is 401(k) Benchmarking?
401(k) benchmarking is the process of evaluating your retirement plan by comparing it to similar plans in terms of fees, investment options, performance, and employee participation. This analysis helps employers make data-driven decisions and identify potential areas for improvement.
Key Areas to Benchmark
- Plan Fees – Compare administrative, investment, and advisory fees to industry averages to ensure cost-effectiveness.
- Investment Performance – Assess fund performance against benchmarks to confirm alignment with participant goals.
- Participation & Contribution Rates – Measure how many employees participate and how much they contribute relative to peers.
- Employer Match – Compare your company’s matching contributions with industry norms to stay competitive.
- Service Quality – Evaluate the level of support and resources provided by your plan administrator.
Why Benchmarking Matters
- Regulatory Compliance: Ensures adherence to ERISA guidelines and fiduciary responsibilities.
- Cost Efficiency: Identifies excessive fees and opportunities for cost reduction.
- Improved Plan Performance: Helps enhance investment options and fund selections.
- Boosts Employee Participation: Allows employers to adjust benefits to encourage greater participation.
- Competitive Edge: Aligns the plan with industry best practices to attract and retain employees.
How Often Should You Benchmark?
Experts recommend benchmarking your 401(k) plan annually or whenever significant changes occur in the business or financial markets. Working with a fiduciary advisor can streamline the process and ensure informed decision-making.
Final Thoughts
Regular benchmarking helps ensure that your 401(k) plan remains competitive, cost-effective, and beneficial for employees. Employers who proactively monitor and adjust their plans can foster greater financial security for their workforce while meeting compliance standards.
Would you like a free assessment of your 401(k) plan’s performance? Contact us today!
