Benchmark Your Way to a Competitive Retirement Plan
Is your retirement plan still working as hard as your employees? Learn what key metrics to evaluate and how benchmarking can help you stay ahead of the competition.
For many employees, a retirement plan is the benefit that matters most.
But a retirement plan that worked five years ago to attract and keep great people may no longer measure up for today's workforce.
As contribution structures, new retirement plan types and employee expectations evolve, your plan should, too. That's how benchmarking can help your organization stay ahead of the curve.
Knowing where your retirement plan stands
Benchmarking looks at what your peers and competitors are doing, so you can see how you compare. As a plan sponsor, it means evaluating your retirement plan's metrics against industry standards and competitors' plans to see where you stand.
Beyond a smart talent management strategy, it's also your fiduciary responsibility.
Federal law requires that plan decisions be made with care and diligence, which means being able to prove that your plan is being managed in participants' best interests. Benchmarking helps you identify gaps and take corrective action when your plan falls short. When something isn't measuring up — for example, if fees are higher than industry norms — benchmarking gives you more information to guide your decision-making.
What's working, what's not and what to do next
While it's important to keep an eye on investment returns, your benchmarking strategy requires a broader view of your overall plan.
Here are six key areas worth evaluating:
- Plan participation rate. How many eligible employees are enrolled in your plan? If enrollment is low, it may be a sign that your plan design isn't connecting with the people it's meant to serve, or your communications about the value of plan participation are off-point.
- Fees. Are your plan fees transparent and on par with the current market? Keep in mind, what looks affordable today may not stay that way as your plan grows.
- Deferral rate. What percentage of their earnings are employees saving? Average deferral rates are one of the strongest indicators of overall plan health and where your employees stand in terms of retirement readiness.
- Investment menu. Does your fund lineup offer strong savings options without overwhelming your participants? A well-designed investment menu balances variety with simplicity, delivers strong risk-adjusted returns and ensures your default investment options are working for everyone.
- Investment usage. Are participants invested in options that align with their objectives and timelines? Reviewing how they're using your plan's fund lineup can show whether your investment menu is doing its job.
- Plan design features. Are you offering options that streamline and boost engagement? Features like auto-enrollment, auto-escalation, employer and safe harbor contributions all impact plan participation and performance.
How do I know if my company's retirement plan is competitive in the market?
Benchmarking your retirement plan against industry standards and peer plans is the most reliable way to assess competitiveness — and it's also a fiduciary requirement under federal law. Federal law requires that plan decisions be made with care and diligence, which means being able to demonstrate that your plan is managed in participants' best interests.
Key metrics to evaluate include:
- Participation rate — How many eligible employees are actually enrolled?
- Fees — Are your plan costs transparent and in line with current market norms?
- Deferral rate — What percentage of earnings are employees saving?
- Investment menu — Does your fund lineup balance variety with simplicity and deliver strong risk-adjusted returns?
- Investment usage — Are participants invested in options that align with their goals and timelines?
- Plan design features — Are you offering auto-enrollment, auto-escalation and employer contributions to drive engagement?
If any of these areas fall short of industry benchmarks, it may be time to revisit your plan design.
How ADP retirement plans stack up
From payroll integration to automatic enrollment to built-in fiduciary support, ADP retirement solutions are designed to help you run a successful, compliant plan that checks all the right boxes and much more.
To learn more, reach out to an ADP retirement services specialist or call (800) 432-401K to get started.
ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor.
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