Benchmarking Your Benefit Plan
What is all this recent talk about benchmarking employee benefit plans? Many of you may be in the know already as it has been a hot topic with the advent of electronic filings. For those of you who are still getting up to speed, websites such as BrightScope.com are being heavily utilized by plans to compare fees, generosity, participation rates and the list goes on.
With the retirement landscape shifting towards the 401(k) plan, participants are becoming more knowledgeable than ever on where their periodic deferrals are going – including how well their plan stacks up against the competition.
What you should know? The Basics.
Benchmarking predominantly uses the information included in Form 5500 filings (available to the public through the DOL’s EFAST2 database) to generate quantitative factors which are then ranked amongst other plans. BrightScope.com is one website that offers this comparability and is free to use. A useful feature of BrightScope is their overall plan rating – a proprietary metric best served at providing comparisons in a peer group setting.
What is a peer group?
Peer groups contain plans of similar size and industry of the sponsor. Benchmarking websites will commonly provide these peer groups to its users.What makes one plan “better” than another?Factors such as lower plan fees, higher participation rates, and greater sponsor generosity – a ratio of employer to employee contributions, are often considered in assessing whether a plan is better than another.
What if your plan does not compare favorably?
Transparency of benchmarking results is key to improving a plan. Third-party administrators, oversight committees and other fiduciaries are likely to be well versed in plan matters and can work together to enact a change.
What other benchmarking options are out there?
In addition to benchmarking websites that are often free to use, plan service providers should be willing and able to provide this data to its plans.
How Can We Help?
