Why Regular 401(k) Benchmarking is Essential

Think of your 401(k) plan like a well-built home. Even the sturdiest structures require routine attention to keep them in peak condition. Similarly, regular benchmarking of a 401(k) ensures that everything is running smoothly and efficiently.

First, let’s define 401(k) benchmarking. It involves comparing your plan’s features, fees, investment performance, and participant outcomes against industry standards. Even well-crafted retirement plans need continuous attention to remain compliant and aligned with participant goals.

Benchmarking ensures that fees are reasonable and transparent. Over time, even minor fee adjustments can result in significant savings for participants. Imagine reducing a 1.5% fee to 0.1%; such a change could mean substantial additional retirement savings over decades.

Frequent reviews help evaluate investment performance, opening the door to better alternatives. For instance, a simple switch to more effective funds could greatly improve outcomes.

Participant Engagement and Retirement Readiness

Assessing participant engagement is crucial. Benchmarking tracks key performance indicators like deferrals and readiness metrics, improving overall plan engagement and outcomes.

As market trends shift, what once was a three-year review cycle is now moving towards annual checks due to fiduciary lawsuits and industry changes. This increased frequency helps document fiduciary compliance, reducing liability and offering peace of mind for plan sponsors.

Consider this: a study found 84% of U.S. retirement plans had at least one infraction often tied to under-benchmarking. Benchmarking acts like an audit, surfacing red flags before they erode participant outcomes or expose the company to legal risk.

Moreover, benchmarking aligns with broader benefits trends, enhancing the plan’s strategic enhancements. Employers have seen participation soar by adopting strategies like auto-enrollment.

In conclusion, proactive benchmarking keeps your 401(k) plan in optimal condition, much like regular maintenance on a cherished home. Stay ahead of potential issues and seek expert help to review your plan. It’s an empowering way to ensure your retirement offerings are as robust as possible.