PLANSPONSOR - February/March 2019 - 4

Insights
Framing Success
W
hat defines a good, or great, retirement plan? And how is a plan determined to be successful?
Our PLANSPONSOR awards programs-Plan Sponsor of the Year and Best
in Class 401(k) Plans-purport to answer those questions each year through both
qualitative and quantitative measures, respectively. Beyond that, answering those questions is the
core goal for the information we provide you throughout our editorial content and our conferences.
Those questions, however simple for us at PLANSPONSOR, or for a plan sponsor or an
adviser to ask, do not lend themselves to simple answers. Often the questions need a qualifier to
ensure the answer will be pertinent. What is the editor, plan sponsor or adviser using as a success
metric? Does success refer to participant outcomes? Is it success as part of a benefits package or a
retention tool? Or is some other answer being sought?
In my estimation, there are at least three ways in which those questions can be framed-and
they guide our discussions when we seek answers at PLANSPONSOR.
First, we examine the questions in terms of fundamentals-what are the building blocks
of a strong plan? What must a plan have to be successful? At a minimum, this would likely be
a plan that gets employees enrolled early, has strong participation, good savings/deferral rates
and a variety of well-priced investment options. Strong plan governance would also be an expectation,
as a successful plan is one that's in line with rules and regulations and has a plan sponsor
that meets its fiduciary responsibilities. We would expect this plan to have an investment policy
statement (IPS) and/or investment committee, along with a regular review process of providers
and investments.
Then we can look at the relative nature of the question-what makes a particular plan
competitive or successful when compared with those at similar size companies or across the same
industry? As part of an overall benefits package, a retirement plan is generally seen as part of a
retention program, which means companies likely compare their plan with those at companies
they compete with for workers.
These relative questions also come up when we at PLANSPONSOR evaluate plan metrics and
consider plan demographics. Are there workers who speak different languages? Lots of hourly or
remote workers? What kind of wages are employees paid? Is there much turnover? All of these
questions affect considerations and decisions about plan design-for one example, as to vesting
and eligibility policy, which might conflict with general, fundamental expectations arrived at
with the earlier question, say if a plan has significant turnover in the first few months of a job.
Employer contribution rates or match formulas might be most frequently measured on a relative
basis, due to how other plans, with similar makeup, approach this aspect of compensation.
Besides the fundamental and relative questions, there's also the evolution of plan success to
consider. The plan design elements and success metrics we use and discuss today are not those we
spoke about 20, 10, or even five years ago. Whether plans offer financial wellness is a best practice
now, but not something we emphasized in the past.
As the industry has focused on how to help retirees use their defined contribution (DC)
plan savings, retirement income or distribution options have garnered attention, as another
example. There have been discussions about evolving best practices related to loans or hardship
withdrawals, as well as who pays for what in the plan or how participants are charged for recordkeeping
services.
Plan sponsors can use any or all of these approaches when examining how their plans are
doing. In my opinion, exactly what benchmarks are used is less important than the fact that there
is at least some ongoing monitoring of a retirement plan's success-and hopefully a strategy in
place to help move the plan closer to that summit. -Alison Cooke Mintzer, Editor-in-Chief
4 PLANSPONSOR.com February - March 2019
The plan
design
elements
and success
metrics we
use and
discuss today
are not those
we spoke
about 20, 10,
or even five
years ago.

http://www.plansponsordigital.com/plansponsor/february-march_2019/TrackLink.action?pageName=4&exitLink=http%3A%2F%2FPLANSPONSOR.com

PLANSPONSOR - February/March 2019

Table of Contents for the Digital Edition of PLANSPONSOR - February/March 2019