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While many plan sponsors focus their benchmarking efforts on fees and other external measures, especially for fiduciary due diligence, benchmarking internally can also be an important effort, according to retirement experts and plan sponsor representatives at PLANSPONSOR’s recent Plan Progress Webinar on plan benchmarking.
Two plan sponsor speakers said they benchmark their retirement plan data to compare progress to the plans’ goals and against similar peers, allowing the employers to measure and define success in reaching retirement plan goals and to more precisely measure the plan’s success.
Plan sponsors should develop benchmarking best practices; develop a mission statement to inform and guide their effort; compare their plan data with plans of similar size and industry; and use multiple recordkeeper datasets—their own, others’ and those publicly available—to extract the optimal value from the sponsors’ time and efforts, the webinar participants explained.
Consider Peer Examples
The City of Milwaukee 457(b) Deferred Compensation Plan continues to benchmark retirement plan data and has also used benchmarking that revealed race and gender retirement preparedness gaps in their plan, said Beth Conradson Cleary, the plan’s executive director.
Benchmarking plan data was critical in “closing a lot of our disparity gaps,” Cleary noted. “Benchmarking was a big way that we were able to both show that there was an issue and then also demonstrate effective outcomes after we made some changes.”
Benchmarking plan data allows the plans’ operators to delve deeper than simply observing high-level data such as participation rates and contributions.
The City of Milwaukee plan managers, after looking at their benchmarking data, “realized that there was a big gap specific to our Black employees and our Latino employees regarding retirement plan participation and retirement savings,” Cleary said. “We decided to incorporate the auto-enrollment feature into our current design, which is when we saw a big shift.”
For developing benchmarking best practices, Cleary advised other plan sponsors to look at what peers are doing that has proven successful.
“If you want to look at best practices, look at the winners of the PLANSPONSOR awards … and find out what they’re doing to get to where they’re at and try to emulate them, because: Why reinvent the wheel if you don’t have to?” Cleary said.
Have a Mission Statement
Baked goods manufacturer Aunt Millie’s Bakieries benchmarks the company’s plan based on its revised mission statement, said Judy Bobilya Feher, its chief financial officer.
“This is not our first mission statement; this one actually has more of a lean toward financial wellness programs and the ability of education tools, as well as retirement readiness,” Feher said. “We changed this earlier this year, [because] we were probably more of that ‘check the box’ on the fiduciary [responsibilities], make sure you’re looking at the investment plan fees and be very protective from that standpoint.”
Stephanie Hunt, a senior retirement plan consultant at OneDigital, said, “Most companies we work with, they just tend to focus on benchmarking the fees, because that is the easy thing and that is where the lawsuits are. That has just generally been the focus, but to really drill down into gender and race and the plan design, comparing it to what others are doing, that’s definitely where we would love to see more companies get to.”
Plan sponsors without a mission statement to guide their benchmarking efforts should develop one that articulates the goals they are trying to reach, said Josh Itzoe, founder and CEO of FiduciaryWor(k)s, a retirement plan advisory offering fiduciary customer relationship management.
“There’s certain things [plan sponsors] do to benchmark that are just good fiduciary hygiene every year, like going to the doctor and getting the check-up,” he said, identifying in both the City of Milwaukee and Aunt Millie’s stories a common theme. “Both plans had a mission statement, and that mission statement was focused on the success of the plan.”
Establishing that mission statement will allow plan sponsors to target their benchmarking and their analysis, leading to improved results.
“It is important to look externally and, certainly, from a risk management standpoint, but [plan benchmarking] should be: What’s that mission? What is our vision? What do we what do we envision for our people and what success looks like?” Itzoe said. “Then let us benchmark in terms of how we’re doing versus what we believe is most important, not necessarily what other plans are doing in the marketplace.”