Whether you’re an adviser or a plan sponsor, creating the best possible 401(k) plan is just good business. It makes everyone look good. And the biggest benefit is that the best 401(k) plans, en masse, should be the most beneficial for participants.
So what four traits could give you bragging rights?
(1) Risk Mitigation – Either in-house or by hiring an outside firm or firms, your plan has tools in place to mitigate fiduciary liability. How does that help participants? In short, anything you’re doing to reduce your risks is simultaneously a step to provide a better product to participants. For example, hiring an outside advice provider and creating a taskforce in-house to do due diligence will provide protection for participants.
(2) Value for Fees – You’ve benchmarked fees and services against reasonable competitors. The lowest-cost plan isn’t necessarily the best. It’s important to know what services plan sponsors and plan participants are receiving in exchange for fees.
(3) Employee Programs – Your plan features several tools and services to help position employees for retirement, like auto-enrollment, auto-escalation, professional account management options, investment advice and educational communications.
(4) Employee Behaviors – The best plans have high plan usage, a high savings rate and participants who are well-prepared for retirement. How do you accomplish these? You do items one through three from this list really well, and you have a robust communications plan in place to help your employees understand items one through three. Further, you track, measure and report plan usage, savings rates and participant preparedness to your employees.
Notice all the criteria above are beneficial to plan participants and plan sponsors.
What traits do you think are important in a top-tier plan? How are you moving toward a plan that possesses all these traits?
Smart401k Financial Communication Specialist