HOW DOES YOUR 401(k) PLAN STACK UP?
Is it ‘good’, ‘average,’ or ‘bad’? What does it mean for a company to offer a ‘good’ plan? One way to find answers is to benchmark your plan.
The value of a good benchmarking study lies in making comparisons with an established standard. It may be thought of as a “report card” identifying good and bad performers relative to a set of benchmarks, as well as identifying factors that contribute to performance differences.
The idea behind benchmarking a 401(k) plan is simple. By using objective criteria to measure a plan, you gage your plan’s relative strengths and weaknesses. You then have a powerful tool with which to make informed decisions about improving the plan in areas such as plan design, investments, costs, education and communication strategies, and finally, service provider competitiveness.
The Essence of A Good Plan
To determine if you have a “good” plan, to know whether your plan is “successful,” you must ask the following basic questions and then compare the answers to objective data:
- Is the plan in compliance?
- What is the overall participation rate?
- What is the overall savings rate?
- How well have the investments performed?
- Is the plan cost- and operationally efficient?