Why do you sponsor a retirement plan for employees? What’s your desired end result? What metrics do you use to gauge success?
How Do You Measure Success?
The administrative and compliance responsibilities associated with sponsoring a retirement plan are of course critically important. As fiduciaries, plan sponsors need to choose and monitor service providers carefully. Experts stress the importance of also keeping our end goals in mind—and tracking progress toward achieving them. For example, is your plan design helping to attract and retain great employees? Are your communications increasing participation rates? Are your employees achieving savings goals?
The recent “2020 Retirement Trends Report” from Vestwell found that most plan sponsors are focused on excellent administration. Plan Sponsor observes:
Plan advisers and sponsors use different metrics to determine the success of retirement plans. Advisers were more focused on plan participation rates (61% listed it as a top factor versus 39% of plan sponsors), while sponsors were more focused on the administrative side, citing no administration errors as their top priority 60% of the time and minimal time managing a plan 59% of the time.
Having no operational and administrative errors is important, says John Doyle, senior retirement strategist at Capital Group, but if the plan sponsor’s goal is to attract and retain talent or get employees prepared for retirement, it’s not a success measure.
Three metrics—participation rate, deferral rates and personalized rates of return—will impact plan participants’ retirement readiness and each is something plan sponsors can influence.
Plan Design and Communication Goals
Many workers across the country are trying harder then ever to save while also steering out from the disruptions caused by the pandemic. Experts advise plan sponsors to look at retirement plan participation rates, deferral rates and personalized rates of return at least annually, if not quarterly.
Understanding these measures can inform plan design and communication strategies to further help participants—and the plan as a whole—achieve end goals. Increasing auto-enrollment deferral rates and adjusting the employer match are two examples of how plan design adjustments might advance plan goals—and employee saving practices.
Risk Management Goals
As a plan sponsor, you also need to revisit your risk management plans periodically—and make sure that all appropriate coverage is in place and current. For example, in the event a plan participant sues over an alleged fiduciary breach—and you are personally named in the suit—what’s your coverage?
Let Colonial Surety Company help. Just select an affordable, comprehensive package and receive a three-point coverage solution:
- The ERISA bond required to protect the assets of the retirement plan from theft;
- expenses in the event of a cyber breach; and,
- Fiduciary Liability coverage to protect you and your assets from personal liability.
- Cyber Liability coverage to safeguard your company and plan from covered losses and
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As a plan sponsor, understand this: the ERISA bond required for the retirement plan does not cover you as a fiduciary.
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