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Measuring Retirement Plan Success

In the nearly 20 years I’ve spent in the retirement planning industry, I’ve been a part of countless retirement plan committee meetings. At the end of the day, they were all about the same thing – measuring retirement plan success. With so much available data, and the technology to deliver it, what are the right metrics for plan success? And how do you define success?

To oversimplify a little, most data points fall into two main categories:  mitigating fiduciary liability and measuring retirement readiness. If I were a plan sponsor, I would want all plan reporting to roll into one of these. And I would view everything else as just noise.

What topics did you cover in your last retirement committee meeting? Fee benchmarking? Investment monitoring? 408(b)(2) compliance? These all speak to fiduciary risk mitigation. Participation rate? Average deferral rate? Participant communication plans? These fall under retirement readiness.

Most plan sponsors have formal policies that define the measurement criteria and success metrics for fiduciary issues. For example, Investment Policy Statements are very common. However, it’s far less common to see formally defined metrics for measuring success in the retirement readiness sphere. If retirement readiness is important, we need to be able to define success because, to quote Lewis Carroll, “If you don’t know where you’re going, any road will take you there.”

You wouldn’t manage any other part of your business without defining success and creating a plan to achieve it. Why should your retirement plan be any different?

I would encourage each of you to work with your plan’s partners – advisers, administrators and the fiduciary team. Invest your time establishing a formal measurement process and specific goals covering participant retirement readiness. Once you’ve narrowed your focus to specific metrics around mitigating fiduciary liability and measuring retirement readiness, subsequent committee meetings can be more productive. And you can forget about the extra noise.

Scott Swezy
VP Smart401k