PLANSPONSOR - October/November 2021 - 24

RESEARCH | 2021 PLANSPONSOR DC PLAN BENCHMARKING SURVEY
FAQ on Benchmarking
in their plans? It also helps you to think
about, what features can you offer to help
keep your people engaged and help them
transition to retirement on time? "
Industry experts David Levine of Groom Law Group, Jim Lyday
of Pensionmark, Dan Peluse of Wintrust, and Brian O'Keefe of
PLANSPONSOR answer common questions that may arise when
benchmarking plan design.
Q: How often should one benchmark one's plan design?
Sources agree it is a good idea to benchmark plan design features, though
there is no legal requirement to do that. Benchmarking annually or as plan
demographics change makes sense for competitive reasons, for long-term
business planning, and for an opportunity to discover and consider features
that could further engage participants.
Q: How many sources of benchmarking data are needed to effectively
benchmark plan design?
Single-source data may not be comparable data for a particular plan
sponsor, as it may rely on overweighted sources, or plan sizes or industries
too unlike the sponsor's. It is important to use several sources and to put the
data into the context of the sponsor's strategy. Looking for an exact industry
match is less important than trying to figure values that share commonality.
Q: What are some valuable plan design benchmark metrics to use?
Contribution levels provided by competitors in the industry, in-service
distribution rights, plan participation rate, average deferral/savings rate,
company contribution amount/percentage, vesting schedule, eligibility
requirements, utilization of qualified default investment alternatives (QDIAs),
average income replacement ratio, and percentage of corporate payroll put
toward the retirement plan.
Q: What is the most important metric for plan design benchmarking?
Average deferral/savings rate typically is the most significant factor in
driving participant success toward achieving all other retirement income
goals and objectives.
Q: What if one benchmark is significantly below or above the range?
Formulate a plan or series of steps that can be taken to reach a goal within
that range. Typically, this will require utilization or modification of a number
of plan design features to improve a specific data point. Keep in mind that
there is no requirement to document this type of range-it is the sponsor's
call as to what level of plan design features are implemented.
Q: Is it best to try to be high, low or in the middle of the range of
a plan design benchmark?
It depends on the role the sponsor wants its plan to play in the competition
for talent. Plans offering more desirable features may attract better
candidates. Other corporate goals may also play a role. Above average
in all metrics is likely the goal; however, goals and objectives should be
customized to the specific business and industry.
Multiple-Source Benchmarking
Makes Sense
A best practice when benchmarking plan
design features is to schedule to do it
regularly, Lyday suggests. " Generally, I'd
say it's a good idea to do it annually. Not
a lot is going to change on a quarter-toquarter
or semi-annual basis. "
" ... when you
know where you
are compared with
other employers,
then you can
think about what
you want to do
to stand out with
your plan. "
Lyday also advises seeking benchmarking
data from multiple sources.
" Single-source benchmarking data can be
incredibly misleading, positively or negatively, "
he says. A single set of data may be
insufficient because the source may have
surveyed mostly companies in different
industries, or in a different geographic
region, or with a significantly different
plan size. " You can find data to support
any idea, " he says. " It's important to put
the data into the context of your strategy,
not use the data for data's sake. "
Having data both for retirement plans
overall and for peers comparable to the
employer also helps a sponsor that wants
to make the case for improving a plan's
design, Lyday says. " When you're advocating
[to an organization's leadership] for
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PLANSPONSOR - October/November 2021

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