401k board

Benchmark Your 401(k) Plan

Runnymede has increasingly been serving as a fiduciary advisor to companies' 401(k) plans so I will be writing a series of articles on how to tune up your retirement plan.  The intended audience is the company and its trustees that sponsor the plan but participants are also advocating for better plans.  It is our hope to help employers optimize and better manage their retirement plan. In doing so, we seek to help employees achieve their goal of successfully preparing themselves for retirement.

Today, it is not only the largest companies across the nation that are thoroughly reviewing their plans to ensure they are fulfilling their fiduciary duties and providing the best plan possible, but many companies in the small to mid-size space are beginning to do so too. Benchmarking your plan is often the best place to start.


What is 401(k) Plan Benchmarking?

Benchmarking your plan means going through a process to see how your plan compares with others of similar size and/or type.  Often, you will be able to measure participant metrics (savings and investing) and quantify the fees you are paying in order to determine whether those expenses are reasonable.


Why Benchmark Your Plan?

Whether your plan is new or old, plan sponsors are benchmarking their plans more regularly due to concerns of 401(k) lawsuits and fiduciary responsibility.  Here are reasons to benchmark your plan.

  1. Meet your fiduciary responsibilities under ERISA

    Under ERISA, the trustee or trustees of a retirement plan have a fiduciary duty to its participants.  This duty requires monitoring and benchmarking service providers to ensure that fees are reasonable and service providers are performing as they should.  Note that it is not only important to engage in this process but to document your actions.  Failing to do so could result in fines and class action lawsuits.
  2. Save your company and participants money

    The law requires fees charged to a 401(k) plan to be "reasonable" rather than specifically defining what is permissable.  This puts the burden on plan trustees to determine what is reasonable so benchmarking is a great way to do that.  Find out what you are paying in plan expenses and then compare your expenses to other similar plans in terms of asset size, number of participants, and the employer's industry.
  3. Improve your service providers

    Most companies' 401(k) plans grow over time through participant and employer contributions and market appreciation.  Too often, service providers do not adjust fees to account for this growth.  In some cases, a plan that was once a start-up plan may even outgrow its original service providers and need to find new service providers that can offer better features and lower costs.  Benchmarking your plan is a good way to keep your current service providers in check and see if you need to shop for new ones.
  4. Improve plan design and features

    Benchmarking and reviewing your plan is a great time to also examine if updates are needed to your plan document, plan structure, and plan design.  Employers should seek to find ways to increase participation using features like auto enrollment and auto escalation.  Perhaps, your fund lineup does not include common best practices like low cost index fund choices or target date funds.


DIY: Getting Started with Benchmarking Data

PLANSPONSOR recently published the findings of its annual 2016 PLANSPONSOR DC Survey: Plan Benchmarking.  This is a great place to start to provide you with context when reviewing your own plan.  Not only can you compare your plan, but the survey can guide you in what areas to look at.

Here are selected highlights:





Still Need Help?

Contact one of our advisers and we'd be happy to point you in the right direction.  If you want to learn more, consider watching my on-demand webinar where I highlight mistakes to avoid and specific improvements that you should check for in your plan.

New Call-to-action

When was the last time you benchmarked your company's 401(k) plan?  Did you get help from a retirement specialist or did you do it yourself?

"401K" by Got Credit is licensed under CC BY 2.0

Share This Story, Choose Your Platform!

About the Author: Andrew Wang

Andrew Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Search Website

Annuity Review Database

Follow Our Podcast

Google Podcasts
Apple Podcasts

Recent Posts