Many businesses set up a 401(k) plan with nothing but good intentions. They want to attract talent and provide a path for a hard-working employee to reach a dignified retirement.
But here’s how things typically shake out shortly after. . . The plan is implemented. . . and then . . . crickets.
- No periodic plan review
- No fee benchmarking
- No investment lineup due diligence
- No plan design analysis
- Perhaps some light education from the retirement advisor and a “your plan looks good,” rubber stamp
Over time, the “set it and forget it” approach results in a very underwhelming and underperforming plan
1. Fiduciary responsibility doesn’t stop after setup
Plan sponsors are the ultimate fiduciary, meaning they are responsible for acting in the best interest of participants. That responsibility is ongoing and not a one-time task.
Regular plans reviews help demonstrate:
• Prudent oversight
• Documented decision-making
• Reasonable vendor and fee evaluation
2. Fees tend to drift higher over time
401k and 403b pricing is not always obvious. Costs can be embedded in investment funds, recordkeeping agreements, or bundled service arrangements. Without the 3-5 year DOL suggested fee review, plans may:
• Pay more than newer, similar-sized plans
• Miss opportunities to reduce administrative costs
• Overlook more cost-effective fee structures
Even small percentage differences can add up significantly as assets grow
3. Investment lineups become outdated
Markets change. Fund options evolve. Employee demographics shift. Yet many plans still use archaic investment menus. Common issues include:
• Overlapping funds
• Underperformance relative to benchmarks
• Lack of lower-cost collective investment trust options (CIT’s)
• Proprietary recordkeeping target date funds
4. Plan design goes stale
Most employees assume: “Someone is keeping an eye on this.”
But in many cases, no formal plan design analysis around eligibility, matching, vesting or automatic features (many more provisions) ever occur. That disconnect can affect:
• Employee confidence
• Participation rates
• Long-term retirement outcomes
5. Participant engagement is lackluster
Now more than ever, retirement industry providers must innovate their technology to meet participants where they are in the retirement journey. A Gen Zer requires different messaging than a Baby Boomer, for example – It’s important that plan participants have access to:
• Effective tools and resources on the recordkeeping platform
• Consistent education around fundamental retirement saving concepts
• One-on-one comprehensive financial education for every participant
This doesn’t need to be complex, but it should be consistent.
More attention = Better participant outcomes
When was the last time you gave your company’s retirement plan a true check-up? Businesses change. Workforces evolve. Your retirement plan should keep pace. Regular plan reviews can uncover hidden fees, outdated investments, plan design opportunities, and ways to improve employee retirement outcomes.
The findings are often eye-opening. Reach out to us today for a comprehensive retirement plan diagnostic and see whether your plan is working as hard as you are.