Why Regular 401(k) Benchmarking Matters for Your Company

Maintaining a retirement plan is a lot like caring for a well-built home. Even when everything appears solid from the outside, regular inspections help you catch small issues before they turn into costly repairs. The same idea applies to a 401(k) plan. A well-structured plan still needs periodic attention to stay compliant, cost‑effective, and aligned with participant goals.

Benchmarking is essentially the process of comparing your plan’s fees, features, investment performance, and participant outcomes against industry standards. It offers clarity, structure, and a clear view of how your plan stacks up in today’s evolving environment.

Spot Risks Before They Become Problems

A plan can look “fine” while hiding inefficiencies—outdated funds, unnoticed fee creep, or low engagement. Benchmarking works like an early-warning system, surfacing risks before they compromise participant outcomes or expose the company to compliance challenges. One real-world example: an unchecked fee moving from 1.5% to 0.1% can create hundreds of thousands of dollars in additional long‑term savings for employees.

Evaluate Investments With Confidence

Frequent reviews help you compare the current fund lineup with better alternatives. Even strong-performing plans benefit from reassessing whether the investment menu still meets the needs of a diverse participant group.

Keep Fees Reasonable and Transparent

Rising fiduciary lawsuits and shifting market standards have pushed the industry from reviewing every three years to conducting annual benchmarking. This yearly rhythm helps ensure fees remain fair, competitive, and fully documented.

Strengthen Fiduciary Compliance

Benchmarking creates a documented trail of due diligence that supports peace of mind for plan sponsors. Acting prudently isn’t just best practice—it’s required. A clear record of review helps demonstrate that responsibility is being met.

Boost Engagement and Retirement Readiness

A healthy plan is one participants understand and use. Benchmarking highlights engagement metrics—like participation and deferral rates—that reveal whether employees are truly on track. A simple plan enhancement, such as introducing auto‑enrollment, can dramatically shift outcomes. Some employers have seen participation jump more than 30% after introducing these features.

Align With Workforce and Market Trends

As labor markets shift, annual benchmarking keeps your retirement benefit competitive. That matters because an underperforming plan can lead to delayed retirements—something that can cost employers over $50,000 per employee, per year. Staying proactive supports both employee wellbeing and organizational health.

In the end, benchmarking isn’t about finding problems—it’s about staying ahead of them. A thoughtful, annual review helps companies remain compliant, cost‑effective, and supportive of employee financial futures. If you’re unsure where to begin or want a clearer picture of your current plan’s health, partnering with an expert can make the process smooth, strategic, and reassuring.