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Three Steps to Benchmark Your Retirement Plan

Employers sponsor retirement plans to help their workforce achieve the standard of retirement living they want. While sometimes intimidating, developing a prudent process to properly manage your plan isn’t as difficult as it may seem.

Benchmarking your retirement plan can help you determine if it aligns with other employers in your space and whether your plan’s associated fees seem appropriate. It can also illuminate potential features that your retirement plan might not currently include but that your participants may benefit from if added in the future. Sponsoring a retirement plan that meets or exceeds industry standards is part of maintaining a competitive benefits package, and this can fortify employee recruitment and retention efforts.

Are your retirement plan offerings competitive? Check out this report to find out.

Taking an active approach to plan management can be achieved through three steps:

  1. document your plan’s current fees;

  2. determine reasonableness through benchmarking; and

  3. optimize your plan based on new information.

Step 1: Document Fees and Expenses

The first step in determining reasonableness is to document all of your plan fees and how they are paid in detail. Start by determining what retirement plan-related services are currently being provided and by which service provider. Services might include recordkeeping, participant education, advisory or consulting, investment advice, and more. After pinpointing the services, determine what fees are associated with each and who pays them – the plan participant or the organization sponsoring the plan.

Step 2: Benchmark Your Retirement Plan

Once there is an understanding of plan costs, you can benchmark that data against other plans in a few different ways:

  • Take your plan to market through a formal Request for Proposal (RFP).

It is imperative that you periodically take your plan to market to see what your existing provider’s competitors would formally charge. Even if you’re happy with your current provider, you can use this data to negotiate better pricing or improve services without having to move your plan.

  • Gather pricing from a few key service providers through a blind Request for Information (RFI). 

Similar to the process above, a blind RFI will solicit pricing information. The difference is that you reach out to just two or three alternatives and your organization will remain anonymous. Typically, this is process is used by a consultant or third-party advisor who keeps the organization’s information confidential in the marketplace to gather pricing from a few alternate recordkeepers.

  • Compare to similar plans using survey data. 

You can obtain a realistic comparison of your plan against others by taking a look at data from actual retirement plans. This information can provide valuable insight not only on fees but also plan features that you may or may not currently offer. The key is to try to identify reports that have surveyed organizations similar to yours in terms of key plan metrics, including industry, types of plans, plan asset size and number of participants.

Step 3: Optimize Your Plan

Throughout your benchmarking efforts, it is vitally important to document your process. This will reduce risk and provide evidence that you’ve completed your fiduciary duty of overseeing plan expenses. Documenting the benchmarking process alone isn’t enough; it’s equally important that you analyze the results. There may not be immediate action to take if your plan’s offerings versus fees seem reasonable when compared with the market. However, fees higher than the industry standard might require the retirement committee to identify whether or not those comparatively higher fees are justifiable. Are the participants receiving more services? Are the investments producing higher returns? If the differences don’t validate higher fees, you may need to negotiate lower pricing from your existing provider or consider alternative providers. Regardless of whether or not you take immediate action, steps to benchmark your plan should be taken at least every three to five years, if not annually.

A Beneficial Process for All

Benchmarking your retirement plan is a beneficial process that allows you to fulfill your fiduciary duties and reduce risk. However, it’s not only to the plan sponsor’s advantage. Ultimately, this process can help ensure that plan participants are receiving the right balance of services at reasonable fees so they are better equipped to reach their personal retirement goals.

Identify your plan’s strengths and weaknesses by viewing our 2019 benchmark report.

A qualified retirement plan consultant can help you begin the retirement plan benchmarking process. If you have any questions, please contact us here.

CBIZ Retirement Plan Services is a trade name under which certain subsidiaries of CBIZ, Inc. (NYSE Listed: CBZ) market investment advisory, investment management, third party administration, actuarial and other retirement plan services. Investments, investment advisory and investment management services offered through CBIZ Financial Solutions, Inc., Member FINRA, SIPC and SEC Registered Investment Adviser, dba CBIZ Retirement Plan Advisory Services. Investment advisory and investment management services may also be offered through CBIZ Investment Advisory Services, LLC, SEC Registered Investment Adviser. Third party administration, actuarial and other consulting services offered through CBIZ Benefits & Insurance Services, Inc.

For important disclosures, please visit: www.cbiz.com/rps-disclosures

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