How Often Should Employers Benchmark Their 401(k) Plan?

Benchmarking is part of ongoing monitoring

A sponsor's work does not end when a provider or investment menu is selected. The Department of Labor describes selecting and monitoring providers and plan investments as ongoing responsibilities. A periodic benchmark helps show that the sponsor is paying attention to cost, service, and participant needs.

Use both a regular cadence and event triggers

Many sponsors include a formal review in their recurring plan governance calendar. An additional benchmark may be appropriate when plan assets or participant count change significantly, service problems continue, fees change, investments are added or removed, the company completes a transaction, or a provider contract approaches renewal.

Compare more than fees

A complete review considers investment options and expenses, recordkeeping, administration, custody, participant education, technology, cybersecurity, reporting, payroll workflow, and sponsor support. The goal is to compare reasonable alternatives using the needs of the specific plan.

Document the conclusion

Keep the materials reviewed, questions asked, alternatives considered, meeting notes, and the reason for the decision. A benchmark may support staying with the current arrangement, negotiating improvements, or exploring a provider transition.

Questions business owners ask