How to Benchmark Your 401(k)

Regularly benchmarking your company’s retirement plan is critical to ensuring its compliance, value, and impact. We’ve distilled the process into four steps so you can quickly assess how your plan stacks up. Follow the steps or click below to talk to a retirement plan expert today.

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STEP 1

Find out what you’re currently paying

Sounds simple, right? Believe it or not, 401(k) costs are not as transparent as you may have been led to believe. While benchmarking your plan shouldn’t be limited to fees, it’s a great place to start. Maybe you know the all-in price, but when we’re talking about your employees’ retirement, details are important. Click below to dive deeper into analyzing your fees.

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    Ask for a Fee Disclosure

    Download our free worksheet to learn what to ask your current provider that will disclose your hidden fees. Better yet, have them complete and send it back!

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    Have a Fee Disclosure Form?

    Upload your 408(b)(2) or any other fee disclosure form below. We’ll comb through it, line-by-line, to identify kickbacks and other unnecessary fees.

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STEP 2

See how your plan compares to similar plans

Industry averages vary drastically depending on the size of your employee base and the assets in your plan, so it’s critical to benchmark your plan against similarly sized companies. Key metrics to benchmark include: fund fees, administrative and advisory costs, employee participation and savings rates, and plan design.

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Number of employees

For the most accurate estimate, select the option that best reflects the number of employees in your company:

Fund Fees

National Average ForUsAll Average
1.09% 0.13%
Source: 401(k) Book of Averages, 15th Edition. Source: ForUsAll clients with standard fund lineup.

Regardless of plan size, funds in the 401(k) plan can be rife with commissions and other fees that line the pockets of recordkeepers and advisors. In fact, a recent study of John Hancock clients confirmed that pricing varies drastically, even among similar sized plans. The great news is that legislation like the Department of Labor Fiduciary Rule is casting a spotlight on commission-driven fees and other conflicted fee practices. Keep an eye on your average fund fees and make sure there’s a good selection of passively management index funds to keep employees happy.

Savings Rate

National Average ForUsAll Average
3.3% 8%
Source: PSCA's 58th Annual Survey. Source: ForUsAll clients with LT Trust as a recordkeeper.

While participation rates have gone up over the past few years, primarily due to plan design features like automatic enrollment, average deferral rates haven’t seen the same momentum. The average savings rate for an employee is still around 3%. If your employees’ deferral rates are on the low side, consider implementing automatic escalation, an option for an employee to automatically increase their 401(k) contribution by 1% every year.

Automatic Enrollment

National Average ForUsAll Average
44.6% 99%
Source: 401(k) Book of Averages, 15th Edition. Source: ForUsAll clients with LT Trust as a recordkeeper.

Automatic enrollment is more popular with larger companies, and most widely used by some of the largest 401(k) plans in America. The benefits are many, including helping:

  • Americans participate in retirement plans and save for their retirement
  • Pass IRS nondiscrimination testing
  • Companies lower per employee costs for the 401(k) plan.
  • Senior executives save more in the plan, potentially maxing out contributions
  • Hard to reach employees and first-time savers save for retirement

Employee Participation

National Average ForUsAll Average
76% 88%
Source: PSCA's 58th Annual Survey. Source: ForUsAll clients with LT Trust as a recordkeeper.

High employee participation rates are hallmarks of the country's top 401(k) plans in 2016. With the option to put away $18,000 pre-tax a year, the 401(k) plan offers Americans the highest maximum contribution limit of all typical retirement plans. No wonder it's the retirement plan of choice for over 750,000 companies in the United States.

All-In Bundled Fees

National Average ForUsAll Average
1.14% 0.59%
Source: 401(k) Book of Averages, 15th Edition. Source: ForUsAll clients with <100 employees and $5m.

Small plans get hit the hardest, often paying 1.5x what their peers with larger plans pay. In fact, the Department of Labor estimates Americans are losing billions of dollars in retirement savings due to inflated fees charged by 401(k) advisors and other service providers. Our recent study of Fidelity 401(k) fees shows that costs can vary even within the same recordkeeper for similar sized plans. The good news is regulators are cracking down on these fee practices, forcing the industry to adapt.

STEP 3

Evaluate low-cost alternatives

After getting a sense for how your 401(k) stacks up to your peers (and where it could use a bit of tuning), the next step is to evaluate alternatives. Even if your plan is above average in every category, you and your employees might still gain a lot by switching providers. Click below to find out!

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Evaluating Alternative 401(k) Providers

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Provider Comparison Worksheet

Learn what questions to ask as you compare alternative providers.

GET THE CHECKLIST
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Compare Cost On Three Recordkeepers

Compare your fees across several low-cost recordkeepers.

PRICE YOUR PLAN
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401(K) Provider RFP Template

Issue an RFP to compare top low-cost providers head to head.

GET THE TEMPLATE

STEP 4

Talk to an expert

After identifying a few areas that you might want to improve, it's best to talk with an advisor. ForUsAll is independent, which means that we don't take commissions or kickbacks. We exist to provide Fortune 500-level retirement plan expertise to small and medium-sized organizations.

 

Talk to us today to schedule a free, comprehensive plan health assessment!

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