Why is benchmarking retirement plan design competitiveness important?

Created by Kelly Knudsen, Modified on Thu, 29 Aug at 11:14 AM by Kelly Knudsen

Benchmarking the competitiveness of your retirement plan design is a critical component of both attracting top talent and fulfilling fiduciary responsibilities. In today's job market, employees increasingly evaluate potential employers based on the benefits package, especially retirement options. A well-designed retirement plan can serve as a powerful incentive, helping employers stand out in a crowded field. If your retirement plan falls short compared to those of your competitors, you risk losing key employees and struggling to recruit new talent, both of which can have long-term impacts on your organization’s success.

Regular benchmarking allows you to compare your retirement plan with those offered by similar companies in your industry. This process can help identify potential gaps, such as lower employer match contributions, limited investment options, or less favorable vesting schedules, which might make your plan less appealing to employees. By identifying these areas for improvement, you can take proactive steps to enhance your plan, ensuring it remains competitive. Moreover, keeping your retirement plan in line with industry standards can help in controlling costs. By analyzing how your plan stacks up against others, you can make informed decisions about where to allocate resources, potentially optimizing both the plan's appeal and its financial efficiency.

From a fiduciary perspective, benchmarking is not just a best practice—it is an essential part of your responsibility to act in the best interest of your plan participants. The Employee Retirement Income Security Act (ERISA) requires fiduciaries to ensure that retirement plans are managed prudently and with an eye towards the best possible outcomes for participants. Regularly benchmarking your plan helps demonstrate that you are actively monitoring and adjusting your offerings to keep pace with industry norms and best practices. This process can protect you from potential legal challenges and help you maintain compliance with ERISA regulations, providing additional security for your plan and its participants.

Furthermore, benchmarking can uncover emerging trends in retirement plan design, such as the increasing popularity of financial wellness programs or the integration of environmental, social, and governance (ESG) investment options. By staying ahead of these trends, you can position your organization as a forward-thinking employer, further enhancing your attractiveness to current and prospective employees.

In summary, benchmarking retirement plan design competitiveness is vital for maintaining an edge in talent management, optimizing plan costs, and fulfilling fiduciary duties. By regularly evaluating your plan against industry standards, you not only ensure that your offerings are competitive but also demonstrate a commitment to the financial well-being of your employees—both critical elements in sustaining a strong, motivated workforce.

References:

[1] U.S. Department of Labor. (n.d.). Understanding retirement plan fees and expenses. Retrieved from https://www.dol.gov/agencies/ebsa/key-topics/retirement/understanding-retirement-plan-fees-and-expenses

[2] Society for Human Resource Management. (2021). Benchmarking your retirement benefits: How to get started. Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/benchmarking-retirement-benefits.aspx

[3] Employee Benefits Research Institute. (2020). Trends in retirement plan design. Retrieved from https://www.ebri.org/retirement-plan-trends

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