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

Plan sponsors dig deeper into data to define and measure the success of their retirement plans against the backdrop of auto-enrollment.

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.  

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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.”

EBSA’s Lisa Gomez Talks DOL 2024 Agenda

The Department of Labor keeps working to implement provisions of 2022’s SECURE 2.0 Act alongside further rules for retirement and health benefits.  

While the Department of Labor’s Employee Benefits Security Administration issues proposed and final regulations related to the SECURE 2.0 Act of 2022, plan sponsors should undertake a general review of their workplace benefits, using the agency’s Cybersecurity Program Best Practices as guidance, advises assistant Secretary of Labor Lisa Gomez, in speaking with PLANSPONSOR.

Gomez advises plan sponsors to stay focused on ongoing compliance issues, while waiting for new guidance.

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“It’s a good opportunity to look at [the DOL’s 2021] cybersecurity [guidance] and again, be reviewing our best practice standards that we put out to see whether or not things have changed internally, [and you] have you covered all the bases,” Gomez says. Plan sponsors must be “making sure the house is in order from a cybersecurity standpoint.”


What Plan Sponsors Can Expect Regarding SECURE 2.0

The 2022 law contained “priority projects that folks can expect to see in the first quarter of 2024,” including a final proposed rule on auto-portability, Gomez says.

As of January 1, 2024, an employer is permitted to distribute a terminating participant’s account balance without participant consent if that balance is less than $7,000 and is immediately distributable under the rule.

According to Gomez, the DOL plans to soon submit proposed guidance to the White House Office of Management and Budget for review. The guidance relates to implementing provisions of SECURE 2.0 that provide an exemption whereby a plan participant’s retirement assets can be automatically rolled over when that person changes jobs.   

“We are working on a notice of proposed rulemaking, and that should be coming out very quickly,” Gomez says.

The assistant secretary notes that twice a year the DOL posts its regulatory agenda to the website of the Executive Office of the President, Office of Information and Regulatory Affairs.  

“We have been very active at EBSA, in issuing both proposed and final regulations,” she says. “It’s not an exact science,” Gomez says.

SECURE 2.0 also required the DOL to issue guidance on retirement plan-linked emergency savings accounts, called pension-linked emergency savings accounts, she adds.

Plan sponsors can expect the DOL to release FAQ on emergency savings accounts early in 2024. Separately, the Department of the Treasury is also working on guidance about implementing the accounts, Gomez says.

Other provisions of SECURE 2.0 that the DOL is addressing include:

  • The agency was working to meet a December 29 Congressional deadline, Gomez says, as of December 21. Regardless, she says, the DOL will have the review finalized, in Q1.
  • A retirement account lost and found database, due by the end of 2024;
  • Following on from a request for information, incorporating improvements to Employee Retirement Income Security Act reporting and disclosure requirements by plan sponsors; and
  • Separately, working with Congress, the Treasury Department and the Pension Benefit Guaranty Corporation to consolidate and improve the plan sponsors’ disclosures, in terms of simplification, consolidation and standardization.

For the last regulatory item, Gomez says she expects the DOL will publish, jointly, a request for information “in the first quarter of 2024.”

Apart from SECURE 2.0-related rulemaking, the department is expecting to release a rulemaking proposal on proper valuation of employer stock.

“Hopefully, in the first quarter, … we are planning to continue to work on the employee ownership initiative within the Department of Labor to promote employee ownership and also to issue proposed rulemaking with respect to adequate consideration and valuation of employer stock,” Gomez adds.  

Additional Guidance

Gomez says EBSA will continue to work on a new proposed fiduciary advice retirement security standard. This rulemaking seeks to successfully implement a successor rule to the ultimately unsuccessful 2018 fiduciary advice rule that was vacated in federal court.

The comment period on the rule closes after January 2, “and so we will be spending a lot of time within the first quarter reviewing comments and working toward a final rule,” she says.

“From a regulatory standpoint, we are very busy,” she continues. “We are also working on final amendments to our abandoned-plan program, as we have noted in our regulatory agenda … that [that] is going to be a first-quarter 2024 topic.”

Additional items for 2024 include health plan-related topics, as the regulator issued proposed rulemaking, rescinding rules for association health plans with a 60-day comment period; requirements related to the Mental Health Parity and Addiction Equity Act; and additional guidance and regulations for group health plans as the DOL continues working to implement the No Surprises Act and provisions that mandate access to preventative care.

“Stakeholders are going to be very busy with lots of stuff to read and comment on, and it is going to be a busy first quarter for everybody,” Gomez says.

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