401(k) Benchmarking: Plan Design & Service Providers

July 1, 2024

Simply stated, benchmarking is the process of reviewing and evaluating your company retirement plan. It involves taking a look at what you are offering your employees today and deciding if it’s appropriate or needs some updating. There are four main areas to focus on when assessing your retirement plan including plan design, service providers, funds and fees.

Each aspect of your plan requires a slightly different set of questions and documented responses. Below we are going to share some best practice questions to help assess your plan design and service providers as you get started on your benchmarking analysis.

Plan Design

When you think about it, plan design is your plan’s framework; it is like the chassis of the vehicle. Do you think all car frames are the same? Probably not. They vary depending on the type of the vehicle (pickup truck, SUV, cargo van, 18-wheeler or sports car). The same is true for your retirement plan, the frame (or plan design) must be able to support your end goal. When it comes to 401(k) plan design, some important considerations include:

  • Who is eligible to join the plan?
    • Age
    • Length of employment
    • Auto-enrollment features
  • What type of accounts can employees use for savings?
    • Pre-tax
    • Roth
  • Is there a company contribution to employees?
    • Which employees?
    • How is the company sharing the money?
      • Required?
      • Not required?
      • Encouraged, based on employee savings?
  • If an employee leaves, what happens to their account?
    • What is the vesting schedule?
    • If their account is under a $1,000, does the employee receive an automatic distribution?
    • If their account is between $1 – 5k, is it automatically rolled into an IRA?
    • If the account is over $5k, what procedures are in place to keep track of the former employee?
  • What about the required Form 5500 tests?
    • Did we pass?
      • Great! But, could we be more efficient?
    • Did we fail?
      • Next time, how can we avoid corrective distributions?
  • How can use the 401(k) plan be used to reward, retain and recruit top employee talent?

Once the plan design is aligned to meet the needs of the company and provide a competitive offering to employees, the chassis is set. But don’t worry, no matter what your plan design framework is like today, it can always be updated – it just may take some professional retooling.

Service Providers

Staying with the car analogy, your recordkeeper is like the make or name brand of the car. Is it a Honda, BMW, Lexus, Toyota, Ford, Audi, Chevy, Porsche or another vehicle brand? We are saying it’s the brand because most of the time when an employer is asked, “where is your plan?” they respond with the name of the recordkeeper. For example, “where is your plan?” “It’s at John Hancock.” “It’s at Voya.” “It’s at Fidelity,” just to name a few examples.

Just as car manufacturers produce different models of vehicles, the same is true of recordkeepers. Just because two employers have two retirement plans with John Hancock does not mean that they are the same. Instead, they could have different platforms, investments, costs, service models, advisors, plan design and more. The same recordkeeper name does not mean the same plan. Which is why, it is important for employers to ask questions and find out more information about what is available.

Questions to ask:

  • What products and platforms do you offer?
  • Are there price breaks or concessions based on our plan size?
  • What services are we paying for? Could you provide a list?
  • Have you made any technological enhancements to your service?
    • Uploading contribution files
    • Seamless payroll integration
    • Online account access
    • Cybersecurity, encryption and fraud prevention
  • What other interesting advancements has your firm made that we should be aware of?

This is not a complete list of questions to ask your recordkeeper; however, it is a start. Overall, the goal of an employer-sponsored retirement vehicle is to get your employees into a suitable car with appropriate features that give them the fuel and ability to drive towards a successful retirement destination.


This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.

Written by Victor Hicks

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