The Importance of Sustaining Home and Retirement Plans
Just like maintaining a well-built home, where regular inspections ensure everything from the roof to the foundation stays in tip-top shape, a 401(k) plan requires consistent attention. You might not notice any glaring issues at first glance, but what lies beneath the surface is what truly counts. A structurally sound retirement plan must be routinely scrutinized to ensure compliance, cost-effectiveness, and alignment with participant goals.
Understanding 401(k) Benchmarking
401(k) benchmarking involves comparing your plan’s features, fees, investment performance, and participant outcomes against industry standards. This practice ensures that your plan does not stagnate but stays competitive and relevant. More and more, the industry is shifting from a triennial review process to an annual one, fueled by rising fiduciary lawsuits and ever-changing market conditions.
The Case for Transparent Fees
Regular benchmarking helps plan sponsors keep fees reasonable and transparent. Hypothetically, ignoring fee structures could lead to significant erosion of retirement savings. Consider this: reducing fees from 1.5% to 0.1% could translate to substantial savings over the lifetime of a plan.
How Better Alternatives Can Transform Plans
Frequent reviews also provide insights into investment performance, opening doors to better alternatives. A case in point: an employer who introduced auto-enrollment and saw participation skyrocket by 34%, reaching an impressive 98%. Thus, leveraging strategic enhancements can yield remarkable results, including heightened participant engagement and retirement readiness.
Aligning with Compliance and Peace of Mind
An often-overlooked aspect of benchmarking is its role in documenting fiduciary compliance. It acts as a safeguard for plan sponsors, providing peace of mind and reducing potential legal liabilities. With around 84% of U.S. retirement plans facing one fiduciary issue or another, often due to under-benchmarking, the importance of regular assessments cannot be overstated.
Staying Proactive and Ahead
Proactive benchmarking serves as an ongoing health check for your retirement plan, tracking participation rates, deferral metrics, and more. By keeping a keen eye on these performance indicators, plan sponsors can drive better engagement and outcomes.
In conclusion, even the best-built houses and carefully crafted 401(k) plans aren't immune to natural wear and tear or industry shifts. Like regular home maintenance keeps your abode secure, periodic benchmarking ensures retirement plans remain robust and beneficial. Stay ahead of potential problems by engaging experts to review your plans, and transform this essential task into a cornerstone of your company's regular rhythms.
