Is It Time to Benchmark Your Company's Retirement Plan?

March 26, 2024

While your 401(k) plan may not have a chirping reminder, regular reviews, fee benchmarking, and a prudent process are key.

Just as we routinely replace the batteries in our smoke detectors, it's equally crucial to give your company's 401(k) plan the attention it deserves.

Often, retirement plans are treated like a smoke detector with fading batteries – they're there, we know they're there, but unless there's an alarming beep, we don't really bother to examine them in detail. But just as you wouldn't overlook a chirping smoke detector, you shouldn't neglect your company's retirement plan, either.

As a plan sponsor, it's vital to regularly review your retirement plan and benchmark for fees, services, and overall value.

Striking the Right Balance

Every employer has unique needs and preferences for the company's retirement plan. Some prefer comprehensive plans with features like financial wellness resources, one-to-one education, onsite educational meetings, regular benchmarking analysis, and hands-on 401(k) consulting. Others favor a simpler approach, with annual investment committee meetings, virtual employee education, online access to financial education, tri-annual benchmarking reports, and periodic vendor analysis.

Regardless of your preference, the key is to ensure that the costs and value of your plan are aligned. If you have ever used dollar store batteries for your smoke detector, you know that the low price means you need to change them out more often which may be more labor intensive and expensive in the long run. So, it's not about finding the cheapest offer, but rather about finding a plan that is reasonably priced for the services received.

The Need for Regular Reviews

Regular reviews serve as an early warning system for your plan. They help you track your plan's investments, fees, features, and benefits. You'll be able to spot any potential issues early on, much like detecting a low battery signal from your smoke detector.

Here's a quick guide:

Topic	Warning Sign	Action
Investments	Underperforming fund	Replace fund
Fees	Benchmark to peer group	Ask for a fee reduction
Payroll	Clunky uploads	360 integration
Participation	Less than 90%	Re-enrollment
Employee Education	Low contribution rates	Implement a robust education program

Decoding Plan Fees

Plan fees can vary widely. But as a plan fiduciary, what's crucial is that you're aware of what you're paying and that it's reasonable for the services received.

Fee reasonableness is necessary because ERISA requires plan fiduciaries to act prudently and solely in the interest of the plan's participants and beneficiaries. This includes ensuring that the fees paid for services are reasonable and the plan receives fair value for those services.

The importance of maintaining a prudent process and regularly benchmarking retirement plans has been underscored by several court cases. For instance, in the case of Sacerdote v. New York University, the court highlighted the necessity for plan fiduciaries to follow a prudent process when selecting and monitoring service providers. Similarly, in the case of Tussey v. ABB Inc., the court ruled that the plan fiduciaries breached their duties by failing to monitor recordkeeping costs and negotiate for rebates from the service provider.

These cases highlight the significance of having a robust process in place to regularly review and benchmark retirement plans, reinforcing the importance of fee reasonableness and the duties of plan fiduciaries under ERISA.

Working Order

Just as we ensure our smoke detectors are in working order, it's crucial to sit down with an experienced retirement plan advisor to review your company's retirement plan. Remember, we speak 401(k), and we're here to help ensure your retirement plan is in top shape.

So, don't treat your 401(k) plan like a chirping smoke detector any longer. Give it the attention it deserves. After all, a well-maintained retirement plan is a smooth ride towards a secure future.

©401(k) Marketing, LLC.

Advisory services offered through Allworth Financial, a Registered Investment Advisor | Disclosures | Privacy Policy

Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Check the background of this firm on FINRA's BrokerCheck.

HMRN Insurance Agency, LLC license #0D34087

¹Barron’s 2024 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking of independent advisory companies is based on assets managed by the firms, growth, technology spending, succession planning, and other metrics.

² Retention Rate Source: Allworth Internal Data, FY 2022

³ The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.

⁴ As of 7/1/2024, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $22.5 billion in total assets under management and administration.

⁵ InvestmentNews 2020 and 2021 Best Places to Work for Financial Advisers. The ranking reflects survey responses and scores completed by both employers and employees. Employers report their organization’s workplace policies, practices, and demographics. Employees complete a survey designed to measure the employee experience.

⁶ 2021 Value of an Advisor Study / Russel Investments

⁷ Ranked 9th Top Wealth Managers By Growth in Assets in the U.S. from RIA Channel, 2022. RIA Database and RIA Channel are registered trademarks owned by Labworks, LLC.

⁸USA Today Best Financial Advisory Firms 2024. The ranking is based on the growth of the companies’ assets under management (AUM) over the short and long term and the number of recommendations they received from clients and peers.

⁹NBRI Best in Class Ethics 2023. The Best in Class level is bestowed upon clients performing at or above 90 percentile of the NBRI ClearPath Benchmarking Database.

^✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

^✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

^†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.