Retirement Insights
Is It Time to Benchmark Your Retirement Plan?
August 13, 2024
If your organization’s retirement plan design isn’t stacking up to competitors’ plans, your organization could face employee turnover and workers who fail to retire on time. These can add up to millions of dollars annually.
What is Retirement Plan Benchmarking?
Benchmarking is the process of evaluating if a retirement plan's services and fees are competitive with other plans of a similar size or type.
A benchmarking review can provide an opportunity to optimize your 401(k), 403(b) or 457 plan design and implement best in class features that meet your organization’s needs and objectives.
How Poor Plan Design Costs Employers
Comparing your retirement plan’s details to those of other companies is an important fiduciary practice to comply with the requirements of the Employee Retirement Income Security Act (ERISA). Understanding and evaluating plan fees, investment expenses, investment options and services is an essential fiduciary responsibility, and benchmarking can help you complete due diligence while ensuring your plan’s design:
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Is competitive with plans offered by employers of similar size/industry/location |
Attracts and retains |
Meets your organization's financial objectives |
Minimizes long-term benefit cost by providing employees with the opportunity to become retirement-ready |
Poor plan design results in delayed retirement, as well as employee turnover. Those costs can be significant over time, as replacing an employee can cost 1.5 to 2 times the employee’s salary.
Studies show that for every worker who delays retirement because they’re not financially prepared, it costs the employer an additional $50,000 per year due to increased healthcare expenses, lower productivity and higher salaries.1 If just 15 workers delay retirement for three years at a company with 500 employees, it will cost the organization an estimated $2.25 million.
Optimizing your plan design can enhance employee satisfaction and lead to higher retention rates, increased plan participation, and fewer delayed retirements. These amount to greater savings for your organization.
of retirement plan sponsors benchmark their retirement plan annually
benchmark every 1 to 2 years2
Regular reviews allow you to identify any potential issues early on. The U.S. Department of Labor (DOL) suggests employers conduct a periodic review of their retirement plan, including a formal benchmarking process, at least once every three to five years to ensure that the plan continues to operate in the best interest of its participants.
Benchmarking is Key to Achieving Plan Goals
USI Consulting Group (USICG) uses proprietary analytics in our Plan Design Benchmarking Study services, comparing your retirement plan against others in your industry, geographic location, etc. USICG’s benchmarking process combines information from more than 4,000 retirement plans with industry-specific data and third-party comparative data to generate a robust comparison.
Through the benchmarking process, USICG’s plan design experts review and analyze an extensive number of data points from a client’s plan, then make recommendations. Pros and cons are listed, along with relative costs, to help clients understand the plan design options. USICG’s team guides organizations to implement “best-in-class” features to improve employee participation, pricing, technology, investments and services.2
Case Study: Benchmarking increases plan participation by 34%
A USICG client with 600 employees and limited HR staff used USICG’s benchmarking expertise to increase plan participation, which was hovering around 64%. USICG conducted a benchmarking study and recommended implementing automatic enrollment at 3% of salary for employees not participating in the plan, as well as adding an automatic contribution escalation option for those participating. Unless the employees opted out, they would be on the path to retirement.
After this plan design change, the organization had a 34% jump in participation, with 98% of the workforce enrolled in the plan.3
Elevate Your Executive Compensation Package Through Benchmarking & Design
In case you missed it, we hosted a webinar discussing the key elements of compensation, market and economic trend impacting employment and how to put together a balanced approach to reward your leaders.
How USI Consulting Group Can Help
USI Consulting Group’s consulting services include evaluating your retirement plan for marketplace competitiveness and developing a plan design that fits your organization today and into the future.
To learn how we can help you optimize your plan’s design, minimize costs and enhance employee satisfaction, please contact your USICG representative, visit our Contact Us page or reach out to us at information@usicg.com.
1 Prudential, Why Employers Should Care About the Costs of Delayed Retirements, 2019.
2 PLANSPONSOR 2022 DC Plan Benchmarking Survey.
3 Actual results will vary. The use of any stated benefits in this case study is intended for illustrative purposes only and may not be used to predict or project future results.
Investment advice provided to the Plan by USI Advisors, Inc. Under certain arrangements, securities offered to the Plan through USI Securities, Inc. Member FINRA/SIPC. Both USI Advisors, Inc. and USI Securities, Inc. are affiliates of USI Consulting Group.
This information is provided solely for educational purposes and is not to be construed as investment, legal or tax advice. Prior to acting on this information, we recommend that you seek independent advice specific to your situation from a qualified investment/legal/tax professional. | 1023.S0621.0051
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