Why Regular 401(k) Benchmarking Matters

Maintaining a strong retirement plan is a lot like caring for a well‑built home. Even when everything appears to be in great shape, regular checkups ensure small issues don’t quietly turn into major problems. The same holds true for a 401(k) plan—what looks fine on the surface may still need attention to stay compliant, cost‑effective, and aligned with participants’ long‑term goals.

Benchmarking a 401(k) plan means comparing its features, fees, investment performance, and participant outcomes to industry standards. It’s an essential tool for uncovering hidden risks, improving outcomes, and documenting fiduciary diligence. And with industry trends shifting from three‑year reviews to annual evaluations, more organizations are making benchmarking part of their regular rhythms.

Keeping Fees Fair and Transparent

Unchecked fees can quietly erode retirement savings. For example, a shift from a 1.5% fee to a 0.1% fee could mean hundreds of thousands in additional retirement dollars over decades. Benchmarking helps identify unnecessary costs and ensures participants aren’t losing valuable growth potential to avoidable expenses.

Evaluating Investment Lineups

Regular reviews help assess fund performance and identify opportunities to bring in better alternatives. Even well‑structured investment menus can drift out of alignment with the market over time. Benchmarking opens the door to stronger, more competitive options that better support participant outcomes.

Understanding Participant Engagement

Healthy plans go beyond fees and funds—they focus on people. Benchmarking tracks deferrals, participation rates, and readiness indicators to help employers understand whether employees are on track for retirement. This insight can lead to strategic enhancements such as auto‑enrollment or Roth features, which have been shown to boost participation significantly.

Supporting Fiduciary Compliance

Plan sponsors have a legal responsibility to act prudently in participants’ best interests. Benchmarking helps document this diligence, reducing fiduciary risk and providing peace of mind. With rising lawsuits and increasing scrutiny, consistent documentation is more valuable than ever.

Preventing Hidden Plan Decay

Even strong plans can deteriorate when left on autopilot. Outdated investment options, fee creep, and unnoticed performance issues are common problems that benchmarking helps uncover early. Like routine home maintenance, early detection protects long‑term value.

Strengthening Workforce and Business Outcomes

A competitive, well‑managed retirement plan helps attract and retain top talent. Underperforming plans, on the other hand, may contribute to delayed retirements—costing employers significantly in productivity, healthcare expenses, and salary obligations.

Making Smarter RFP Decisions

Annual benchmarking ensures a plan only goes through a full request-for-proposal process when truly needed, saving time and resources. It keeps the plan current without unnecessary administrative burden.

Regular benchmarking isn’t just about fixing problems—it’s about staying ahead of them. By taking a proactive, informed approach, businesses can support better participant outcomes, strengthen fiduciary protection, and ensure their plan stays resilient in a changing landscape. For any organization looking to keep its retirement program strong, seeking expert support in reviewing the plan is a smart and reassuring next step.