How to assess the health of your company’s retirement plan

Content Type: Article

Don’t set and forget retirement plans.

Many employers understand that offering appealing retirement savings options is a powerful tool for attracting and retaining talent, which is especially important today because unemployment is low and demand for skilled workers is high. Employers are enhancing their retirement plans to both improve the financial well-being of their workers and to bolster their ability to retain valuable employees.

While offering retirement plans can be an important strategic move by employers of all sizes, it’s not enough to set and forget them. Employers—and the partners they work with to provide retirement plans—need to routinely evaluate the benefit’s impact and effectiveness.

While conducting this annual evaluation helps to ensure regulatory obligations are being met, it can also help uncover other signals that indicate a plan tune-up may be needed.

Here are strategies to examine your company’s retirement plan along with potential actions to take based on your review.

Remember your objectives

Any plan assessment and reevaluation must be grounded in the objectives a company has in providing it. “One of the first questions companies should be asking is ‘What is the goal of our plan?’,” says Guy Martin, wealth management risk and control manager at Regions Bank. Those goals can include attracting and retaining employees, building a more employee-centered company culture or improving the long-term financial health of workers.
Make sure to meet your obligations

Any retirement plan assessment should be done with an eye toward compliance with applicable laws and regulations, such as the Employee Retirement Income Security Act (ERISA), which sets minimum standards for certain employer-sponsored retirement and health plans. “Plan fiduciaries have a duty to act prudently and solely in the interest of the participants and beneficiaries,” says Martin. “This duty includes responsibilities around investment selection, monitoring and diversification—to help ensure these details remain in alignment with plan purposes and continue to be beneficial for plan participants.”

Ensuring plan fiduciary obligations are being met can be complicated, which is why it can be so helpful to work with an experienced partner who understands and has experience in this area.

Though requirements may depend on the type of plan your company offers, other responsibilities can include:
- Service provider oversight and review.
- The completion of required filings, testing and disclosures.
- Ensuring company actions are in line with plan document requirements.
Evaluate employee-centered metrics

Every company has a unique business model, strategy, goals and workforce. Accordingly, there is no one-size-fits-all metric for determining whether a retirement plan is delivering value to the employees it is meant to help. One straightforward way to find out is by asking employees. “Employee feedback is absolutely a way to gain valuable insight into the health of the plan,” says Martin. “What better way to know whether your employees are satisfied and whether your plan is helping them meet their own retirement goals than to ask?”

Yet, surveys by themselves will not be enough to gauge plan effectiveness. It’s also important to look at data that clearly reflects employee engagement with a retirement plan. Helpful metrics include:
- Who is participating? Review the number and percentage of employees who are actively participating in the plan.
- What is the rate of participants taking out loans out of the plan? A poor score here could be a sign participant education is needed.
- What are the deferral levels? Are employees maxing out their contributions and taking advantage of company matches when they are available?
- Which plan options are most popular among employees? Are there add-ons that would make a retirement plan more attractive, such as health savings accounts or flexible spending accounts?
Review service providers

Companies may enlist the help of partners like recordkeepers to help implement and administer their retirement plans. “It is prudent to conduct an assessment of service providers to ensure they are providing the value needed to help administer the plan properly,” says Martin.

Regions can help. “We’re unbiased when it comes to plan providers,” he says. “This allows us to take more of an independent and consultative approach when helping the client with their evaluation and decision as to who’s the better option to meet their needs.”
Use findings to make changes

Ultimately, the point of a plan review is to find areas of improvement that will help bolster the retirement benefit a company offers its employees. A review’s findings should be leveraged to pinpoint changes that will be most impactful for employees, such as adjusting investment options available or providing education.

Translating insights from a plan review into action is another area where Regions can help. “Our team regularly works with employers to navigate an array of decisions that have to be made with respect to their fiduciary responsibilities, such as investment lineup selection and monitoring to assisting in the development of participant education strategies,” says Martin. “The ultimate goal is always to do what is right and help the employer—and ultimately their employees—work toward their goals.”