Why Benchmark Your Plan?

Retirement plan data is for more than keeping records—it can enhance a plan’s success, plus keep the sponsor in compliance.

Since 1996, PLANSPONSOR has annually surveyed defined contribution plan sponsors nationwide. This survey, the PLANSPONSOR Defined Contribution Survey, is among the largest, most extensive of its kind and helps industry professionals, notably plan sponsors, plan advisers and financial consultants, stay informed about emerging trends in plan design. It can also encourage the consideration of plan enhancements that align with participant best interests—and the adoption of best practices that can optimize the enhancements’ use. One such best practice is benchmarking. 

Benchmarking can be used to evaluate any system, methodology or participant response for which plan data is available. Significantly, it can aid fiduciaries in meeting their responsibilities under the Employee Retirement Income Security Act: monitoring and evaluating service providers and other plan expenses to make sure fees are reasonable based on the level and quality of services being delivered; monitoring and reviewing the plan’s investment options regularly to ensure they perform in line with expectations; and disclosing plan, investment and fee information to participants so they can make informed decisions on investing their savings. 

Plan sponsor representatives, joined by two retirement experts, in PLANSPONSOR’s recent Plan Progress webinar on plan benchmarking, said they use the practice to see how their plan is meeting its goals, as well as to compare the plan with peer plans. By this combined strategy, these sponsors said, they can more precisely measure their plan’s success. 

Experts recommend a number of best practices and note these are key to getting a more comprehensive picture: developing a mission statement to inform and guide the sponsor’s efforts; comparing the plan’s data with that of plans of similar size and industry; and comparing multiple datasets—those of the plan’s own and other recordkeepers, and data publicly available.  

Consider Peer Examples 

The City of Milwaukee 457(b) Deferred Compensation Plan, 2022 Plan Sponsor of the Year in the Public DC category, benchmarks its retirement plan data and, in doing so, discovered racial and gender retirement preparedness gaps, said Beth Conradson Cleary, the plan’s executive director. “There was a big gap specific to our Black employees and our Latino employees regarding retirement plan participation and retirement savings,” Cleary said. 

Benchmarking plan data was critical in “closing a lot of [these] gaps,” she noted. “It was a way we were able to both show that there was an issue and then also demonstrate effective outcomes after we made some changes.”  

A key change the plan managers made was adding automatic enrollment to the plan’s design. “[That] is when we saw a big shift,” Cleary said. 

Benchmarking plan data can prompt a plan’s administrators to delve deep into their plan’s demographics and structure, vs. simply skimming the surface with the usual variables such as participation rate and contributions, she said.  

For developing benchmarking best practices, Cleary advises other plan sponsors to examine what their peers are doing that has proven successful. 

“If you want to look at best practices, look at the winners of the PLANSPONSOR of the Year Awards. … Find out what they’re doing to get to where they’re at, and try to emulate them. Why reinvent the wheel if you don’t have to?” Cleary said. 

Have a Mission Statement 

Baked goods manufacturer Aunt Millie’s Bakeries, 2022 Plan Sponsor of the Year in the Corporate DC $150 million to $250 million category, 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 [capability] 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 [functions], 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’s the easy thing, and that’s where the lawsuits are. But to really drill down into gender and race and the plan design, comparing it with 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 that provides fiduciary customer relationship management. 

“There are certain things [plan sponsors] do to benchmark that are just good fiduciary hygiene every year, like going to the doctor and getting the checkup,” he said, identifying in both the City of Milwaukee’s and Aunt Millie’s Bakeries’ stories a common theme. “Both plans had a mission statement, and that mission statement was focused on the success of the plan.” —Noah Zuss