401(k) Plan Benchmarking
 |
A Plan Sponsor and/or Plan Administrator needs to be aware, on an ongoing basis, of how the Plan’s overall performance compares relative to internal stated objectives and also to other 401(k) plans having similar features, such as participant investment direction, safe-harbor, plan loans, hardship distributions, etc.
Key Benchmarking Criteria
- The percentage level of eligible employee participation as compared to plans of similar size and characteristics;
- The average annual salary deferral percentage level of participants as compared to 401(k) plans sponsored by companies within the same industry and demographics; and
- The Plan’s overall operating and investment expenses (including fees) as compared to 401(k) plans sponsored by companies within the same industry and demographics.
Common Benchmarking Questions
- Does the Plan have established internal operational, expense and participation goals?
- What is the Plan’s current participation percentage among eligible employees?
- What is the average salary deferral percentage of the non-highly compensated employees who participate in the Plan?
- How do the fees for recordkeeping, administration, investment and all other expenses compare to comparably sized (in terms of plan assets and number of participants) 401(k) plans?
Periodically (every three years) benchmarking these and similar aspects of comparably sized 401(k) plans should help you to understand where your Plan stands relative to other similarly situated plans. This, in turn, can help you to make proactive decisions to help reduce the likelihood of participants’ adverse claims based on fiduciary liability.
Outside Assistance
A competent, independent Registered Investment Adviser (RIA) or similar consultant currently acting on behalf of the Plan Sponsor may be able to assist you with the performance of this activity, depending on the terms of the services agreement between the Plan and the provider.
In addition, Organizations offering ERISA plan benchmarking services are available in the marketplace. When choosing a provider of these services, special care should be taken to determine their willingness to assume fiduciary status, the scope of resources from which to draw, and their reputation and expertise.
Material contained in ComplianceDashboard is a compilation of generally published information by the Department of Labor and other public agencies regulating employee benefit plans and employee benefit issues. It is not legal advice, and should not be construed as legal advice. If legal advice or other professional assistance is or may be required with regard to any issues referenced in this website, the services of a competent legal or tax professional should be immediately sought. The inclusion of links within the ComplianceDashboard website is for informational purposes only. ComplianceDashboard does not warrant the accuracy of information outside this website that is found as a result of following links contained herein, nor does the inclusion of those links herein constitute endorsement of the content of any other website. If you have questions regarding this disclaimer, please contact us at 877-328-7880.