Are You Benchmarking Your Company’s 401(k) Plan?

Reviewing your company 401(k) plan ensures that you and your employees are getting the best features for your money. You can monitor the company’s budget, retirement plan benefits, and value by benchmarking your company-sponsored 401(k) plan.

Benchmarking your plan doesn’t have to be complicated; our team is here to help you understand what it means to benchmark your company 401(k) plan and guide you through the process.  

What is 401(k) plan benchmarking?

Benchmarking your 401(k) plan involves comparing your current plan’s design, fees, and services to other plan provider options. It’s the responsibility of employers to ensure that the plan fees are reasonable for your company and your plan participants.

Why is 401(k) plan benchmarking important?

The Employee Retirement Income Security Act, (ERISA), requires you to act in the best interest of your employees. Benchmarking your 401(k) plan helps to ensure that you are performing your due diligence and saving the company additional stress, extra time, and additional funds. For consistency, employers may choose to benchmark every few years.

What parts of the 401(k) plan should be benchmarked?

When benchmarking your company-sponsored 401(k) plan, you’ll need to know which parts of the plan you should compare to plan competitors and the industry standards. There are several factors you can consider in your comparison.

The following are just a few of those components:

1. Plan type: There are a plethora of retirement plan types used to help employees save for retirement. Look at your plan type and ensure that this is still the best option for your company based on its size and needs.
2. Plan fees: The fees associated with your company’s 401(k) plan include:
   • Administrative fees – Customer support, plan management, legal services, and record keeping are all included in this area. The costs can be covered by the employer or charged to the employees as part of their plan.
   • Investment fees – Fees may be paid by plan participants when investing in many of the plans’ funds. Employers will want to ensure the cost of investments are competitive.
   • Transaction fees – When moving funds, there are charges associated with withdrawals, loans, and other forms of transferring money. Plan fees may change over time. Monitoring these will help you decide if you’re getting enough value for your money.
3. Services provided: 401(k)plan providers can provide services like third-party administration and easy payroll integration. When reviewing your plan services, ensure they are in the best interest of your employees and the costs associated with those services are in line with other plan provider options and industry standards.Also, consider if you’re satisfied with the services included in your current plan. If not, it may be time to change your plan provider.
4. Plan education: Your 401(k) plan provider should provide employees with information regarding plan fees, features, deadlines, investments, and more. If your current plan provider does not offer plan education, you may consider opting for a new plan provider.

Conclusion:

You’re already moving in the right direction by giving your employees an option to save for retirement. However, all 401(k) plans are not created equal. Taking the time to benchmark your company’s 401(k) plan can help ensure that you and your employees are receiving the best services and benefits for the money. You’ll also breathe a sigh of relief knowing that your company made a cost-effective choice.