Being a Plan Sponsor doesn’t have to be complicated, but you must always act prudently in the management and administration of your plan.  

A Plan Sponsor or Fiduaciry has several responsibilities, but one of the best ways to become an effective sponsor is to benchmark.  What is benchmarking? Basically, its keeping a barometer, a guideline, that helps keeps your plan on track.  Here are some examples of benchmarking criteria:

  • Participation rate
  • Contribution and deferral rates
  • Maximizing company match
  • Utilization of catch-up contributions
  • Utilization of goal setting tools

We do  the  compliance reviews and benchmarking to see where your plan stands up against other plans of  similar size and value.  This comparison allows  us to help the plan sponsor determine whether or not they need to improve some aspects of their own plan to maximize its performance.

Other important aspects of a plan reviews include:

  • Automatic Enrollment 
  • Loans/Hardship Withdrawals
  • Catch-Up Contributions
  • Roth Deferrals 
  • Investment Options/Advisory 
  • Stock Options 

Lastly, all companies should have an investment policy statement (IPS).  An IPS is a statement generally between an investor and the investment manager which specifies the investment goals and objectives of a client and outlines the strategies that the manager should employ to meet those objectives.  

Benchmarking with the strategies detailed above will ensure that you, as Plan Sponsor, is diligently performing your role as a fiduciary, as outlined in ERISA, without risk or liability, and you will have a successful performing 401(k) plan.

IPS (Investment Policy Statement) & EPS (Education Policy Statement)

  An IPS is a document that provides fiduciaries with a framework to help them detail the standards by which investment decisions are made and monitored, and investment performance is measured under the plan.  

  • Outline a plan’s investment goal and objectives
  • Identify the investment alternatives  
  • Document the process and criteria for selecting and monitoring the investment options and\or managers
  • Highlight the types of educational and advisory services available to help employees make decisions

An IPS can assist fiduciaries\plan  sponsors demonstrate prudence with regards to how the investment options offered under the plan were selected and monitored.  This could prove advantageous if the plan is ever audited by the DOL.  An EPS is a  policy or a roadmap designed to provide a specific plan of action for enrollment meetings, education and participant communication ​  

  • Overview of the plan
  • Education goal – identified the plan ‘s challenges (e.g, contribution rate)and how they will be addressed
  • Education objective – identifies the type of campaign being rolled out to help employees understand their retirement objectives and investment options.
  • Education strategy- identifies how the education program will be rolled out and measured
  • Educational calendar – outlines a year –long schedule for various campaigns
  • Roles and responsibilities-identifies who will deliver and measure the educational program
  • Results- measures a campaign effectiveness against pre-determined metrics

Also, if used together, an IPS and EPS can complement each other .  For example,  the  following should be in the EPS:  Financial planning and strategies, such as diversification principles Asset Allocation concepts, such as target date and risk-based investment options  Relevance of performance vs returns Investment fees Retirement savings/planning calculators  If all the above is documented in the EPS , a plan fiduciary may be able to demonstrate the prudent steps they took to provide employees with the information and support they needed to help then make  informed decisions.