The Importance of Regular 401(k) Benchmarking

For many organizations, a 401(k) plan is one of the most valuable benefits offered to employees. However, simply establishing a plan and allowing it to run on autopilot is insufficient. Regular benchmarking is an essential part of responsible plan management, helping to ensure that the plan remains competitive, cost-effective, and compliant over time.

Fiduciary Oversight and Compliance

Plan sponsors have a fiduciary duty under ERISA to act in the best interests of participants. Benchmarking—comparing your plan’s fees, investment performance, and services to those of industry peers—helps demonstrate that you are fulfilling this responsibility. Regulators and courts increasingly expect sponsors to have a documented process for monitoring and evaluating plan providers, making benchmarking a critical tool for risk management.

Cost and Fee Transparency

Over time, plan fees can increase or become less competitive in comparison to the market. Regular benchmarking ensures that administrative, record-keeping, and investment fees remain reasonable when compared to similar plans. This process can lead to cost savings or improved services for both employers and participants.

Investment Quality and Performance

Markets evolve, and so do investment products. Benchmarking ensures that the plan’s investment lineup remains competitive—not just in terms of performance but also in terms of risk, diversification, and participant needs. Periodic reviews can highlight when funds consistently perform poorly compared to their peers or when new, lower-cost options become available.

Attracting and Retaining Talent

A well-structured and competitive 401(k) plan is a powerful tool for employee recruitment and retention. Benchmarking against peer plans helps ensure that your benefits package stays aligned with market standards, enhancing your overall value proposition as an employer.

Supporting Participant Outcomes

Ultimately, the goal of a 401(k) plan is to help employees build financial security for retirement. Regular benchmarking enables sponsors to make strategic improvements—such as offering better investment options, enhancing educational resources, or reducing costs—that can have a significant impact on long-term participant outcomes.

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