SURVEY SAYS: Information From Peer Benchmarking

Last week, I asked NewsDash readers, “Does your firm/adviser perform peer benchmarking to see how your plan stacks up to others, and what would you like to know about your peer plan sponsors?”

Nearly three-fourths (73.1%) of responding readers work in a plan sponsor role, 19.2% are advisers/consultants, and 7.7% are TPAs/recordkeepers/investment managers.

Among all respondents, 73.1% indicated their company or plan adviser performs peer benchmarking to see how their retirement plan stacks up to others, while 15.4% said they do not and 11.5% don’t know.

Asked what information they would like to know about their peer plans, plan design features, fees, participation rates and average deferral rates were common answers. But there were some not so common answers, such as, “I question whether the peer results can be skewed to achieve desired results.”

Responses included:

• fees paid, asset allocation, total return
• How are Plan Sponsor’s implementing a sound risk management process?
• Fees, match structures, plans and services offered. Also what services are utilized?
• plan features offered by others in our industry (law firms)
• Average participation, employer matching provisions
• How does our plan offerings & fees compare to other small group plans?
• cost, participation rates, common features and are they happy with their current providers.
• Age breakdown of participants, account balances, and contribution requirements under the plan
• I’d love to know if plan sponsors are engaging their employees in the 401(k) Plan, or just letting them “coast.” I think semi-annual or annual ee meetings are critical for keeping employees interested in retirement.
• Average balance, average deferral rate, % of participation.
• Company match rate, participation rates, average salary, average account balance, etc.
• Do the company have a Pension Plan as well as the 401(k)
•  (1) More info on their employees’ demographics. (2) Do they have a DB plan — frozen or the status as it applies to most DC participants. (3) Bonus plans outside of DC plan.
• For clients with smaller asset balances (<$5M), do other plan advisors provide fee benchmarking?
• The comparison of our plans performance is always favorable. I question whether the peer results can be skewed to achieve desired results. What I am questioning is could peer results be sorted in such a way that they make our plan results look better than the benchmark? I say to myself, “No that can’t be”. Then I watch the national news and say, “Why not?”
• Our primary use of benchmarking statistics is to show our clients how to retain and attract top talent by, at the very least, matching the features that are most common in their industry and plan size, and preferably, exceeding those offerings. The benchmark reports are often very eye-opening for plan sponsors!
• Usually the hardest data to acquire is outside of the US and developed markets. Finding out what your competitor’s retirement and medical plan designs are in underdeveloped markets is hard to acquire, and highly valued.

Among readers who left comments, many pointed out the benefits of peer benchmarking—to make sure the plan is competitive, to potentially reduce plan costs and to get new ideas for their plans, as well as others. A couple of respondents noted that beer benchmarking does not show plan sponsors everything they need to know. Editor’s Choice goes to the reader who said: “As a retention tool the plan has to be comparable to my competition, relatively simple to administer and yet still fit in my budget. I feel benchmarking should help me determine each of these items.”

Thanks to all who participated in our survey!

Verbatim

Helps a Plan Sponsor defend their documented decisions are compliant with the written Investment Policy Statement.

Peer benchmarking helps us to be competitive with what we offer

It can help in making the case for enhancements to the Plan

As a retention tool the plan has to be comparable to my competition, relatively simple to administer and yet still fit in my budget. I feel benchmarking should help me determine each of these items.

Helps us to keep up on trends and understand what options are out there that we might not otherwise be aware of.

You can find out if others are doing something you’re not, and if it would be beneficial for your participants.

Just nice to see confirmation that we rarely see a study where we have lower participation, wage deferral or participant balances. Much be doing something right.

You never really know the whole story.

We are curious but there are so many other factors…typically benchmarking is only one of many factors.

It helps plan fiduciaries fulfill their ERISA fiduciary obligations to ensure plan fees are reasonable. It also seems to have helped reduce plan costs overall.

It goes set a very good achievement bar to shoot for.

Keeps you on your toes and in line with what participants want and expect.

Peer benchmarking does provide a benefit, as most senior leaders will support a proposal that will make their retirement plans more competitive. The problem is that innovation usually suffers with this model, so we try to balance competitiveness with innovation to find a mix our employees value.