Plan Sponsors Benchmark Plan Data to Reveal Participant’s Disparities, Retirement Readiness

Plan sponsors with auto-enrollment in retirement plans define the success of their plan by benchmarking data, performing deep analysis of plan information, measuring the performance of benefits and helping them to recruit, retain and retire employees in line with the goals of their business. 

While each plan sponsor continues to closely track the two important data points the City of Milwaukee 457(b) Deferred Compensation Plan, and the Rehmann LLC 401(k) plan for employees of the business consultant and retirement plan advisory firm, based in Farmington Hills, Michigan, benchmark their retirement plan data beyond high-level information such as participation rates and contributions.  

By plans analyzing their demographics—beyond the high-level—data may reveal disparities in retirement savings and plan participation, and deeper data analysis allows plan sponsors to dig further into the plan’s information, facilitating plan sponsors gaining a greater understand of their participant’s retirement preparedness.

Operating distinctly as retirement benefit plans—the City of Milwaukee 457(b) Deferred Compensation Plan defined contribution plan that supplements the defined benefit pension, and Rehmann’s defined contribution plan 401(k)—are benchmarking their participant’s retirement readiness, retirement benefit representatives noted.

Defining the benchmarks

The City of Milwaukee Deferred Compensation Board, pursuing deeper insights into the plan—following high-level analysis of the two data points—examines plan data “along the lines of a variety of different demographic information related to age, salary quartile, race, ethnicity, gender and we consistently benchmark this each quarter,” says Beth Conradson Cleary, the plan’s executive director.

“We also measure success with the help of our recordkeeper [Voya Financial],” she adds. “They have the ability to take a snapshot of a variety of retirement benefits that our participants have in addition to deferred comp.”

Stephanie Hunt, a senior retirement plan consultant at OneDigital, says she is seeing plan sponsors looking more deeply into demographic data.

“Now, we’re seeing plan sponsors taking an extra step, they’re looking deeper into plan demographics: gender, race, job title, salary ranges to really dig in to [plan data] and say, ‘are there certain subsets of the employees that work for us that are maybe more behind than others’ [such as] blue collar versus white collar; male [compared to] female [where there are retirement disparities],” Hunt notes.  

Rehmann benchmarks participants retirement readiness, presenting the analysis to every participant, says Gerald Wernette, a principal in and director of consulting services at Rehmann.

“We have a campaign that we time with—we call it our benefits fair–and that also happens to gel with when people are going to get raises,” Wernette says. “We prepare this analysis for each and every associate in our firm.”

Rehmann presents the retirement readiness analysis to participants, and it shows employees their current retirement savings amounts, what a sufficient retirement income objective would be and some methods to reach the amount of assets sufficient for retirement, he adds.

“It’s been very successful in moving the needle for people” toward greater readiness for retirement, says Wernette.  

Measuring the plan

Cleary consults peer municipality retirement plan data to compare the Milwaukee plan to other similar plans. She uses the Public Research Retirement Lab, a collaboration between the Employee Benefit Research Institute and the National Association of Government Defined Contribution Administrators.   

The City of Milwaukee retirement plan works with Callan LLC to benchmark the plan’s investment fees against other plans, she says.

Rehmann uses The Retirement Analysis Kit tool from RetireReady Solutions.

“Until having,” the assessment tool “we always struggled,” to accurately measure the retirement readiness of plan participants, Wernette adds.

Benchmarking supports deeper plan analysis because it “gives us a clearer picture on how good of a job we’re doing, getting people prepared for adequate retirement income,” Wernette adds. “The other thing I really like about it is being able to segment our population” by age group.  

For plan sponsors to gain a greater understanding of each of these demographics and their participant’s challenges they can consult he data—on their plan and others—comparing information to past plan years and to other similar plans, says Stephanie Hunt, a senior retirement plan consultant at OneDigital.

Benchmarks are shifting

Benchmarking beyond the high-level data also allows plan sponsors to draw deeper insights about plan performance and success. Similar to the retirement plan making “any other buying decision or performance decision, you’ve got to have a way to determine if you’re moving the needle,” says Wernette.

“Whether it’s the recordkeeper, the advisor I’m working with, the design that I’ve utilized or the techniques that I’m using to try to move participants or the underlying investments, all those things need to be benchmarked,” he notes. 

However, many plan sponsors have not decided to extend their retirement plan analysis and benchmarking efforts beyond participation rates, contributions and fees, says Hunt.

“Typically the most common way [plan sponsors benchmarked plan data] was ‘let’s look at participation, let’s look at average account balance, let’s look at deferral rates’ and those are all great, they’re good starting points,” says Hunt.

Plan sponsors in specific industries should look at the industry as a whole and to other companies in the business, says Hunt.

“Having the ability to compare and benchmark to other companies really benefits the employee because [participants] can get into the plan faster, it usually results in a shorter vesting period, or even a safe harbor plan just to be competitive with hiring,” she says. “From a competitive nature the companies can really figure out how to attract and retain employees as well [because] there’s so many [more] different ways to benchmark now than there used to be.”