Benchmarking is an important part of managing your company's 401k. This video outlines some things to consider when benchmarking. CUI Wealth Management provides a benchmarking service to clients and prospective clients. Please reach out to us if you have questions or need help.
Welcome back to Five Minute Fiduciary, a production of CUI Wealth Management. If this is your first time joining our weekly production, we have one goal; to provide good content to fiduciaries of 401k plans in five minutes or less once a week.
So what is 401k benchmarking and why is it important? You likely do some simple benchmarking every time you fill up on gas. As you drive, there are signs for gas stations all over the place, making it really easy to compare costs. You may be even willing to pay more for the gas if you know that the quality and the services are reasonable for the price you're paying.
Now let's compare this to 401k. As a 401k fiduciary, you make decisions that are going to impact the participants and their beneficiaries. You're also held to a high standard of duties and responsibilities. But how do you know that the plan expenses are reasonable? How do you know how you compare to other plans that are similar in size in a similar industry without having anything to compare it to? Unlike filling up your car with gas, you don't pass signs every day on your way to work that tells you how competitive your plan is.
Some advisers and other service providers offer to benchmark. Here at CUI Wealth Management, we offer a comprehensive second opinion service for those who are not clients. We also provide benchmarking for current clients as part of our ongoing service commitment.
Let's talk about some items that could be good to benchmark. Funds in your 401k plan are good to compare on a regular basis. If your company has an investment policy statement, it's important to review that on a regular basis to make sure it doesn't need to be updated. It's also important to make sure that the funds are still meeting the criteria of that investment policy statement. Fees are also important to review every now and then. Most plans have at least a portion of their fees coming out of participant accounts. The fees of participants Pay can directly impact the amount that they are saving for retirement. This doesn't mean you need to go for the absolute cheapest option. There possibly is out there, but you need to make sure that the services justify the costs.
It's good to periodically review your plan design. What does matching and vesting look like? How does that compare to similar companies of similar size in a similar industry? What about participants? Does your current platform provide sufficient participant education? Sometimes recordkeepers will have resources that can be used for education meetings. On a lot of times, advisors can help put together education calendars and can be there to help provide and manage the participant education.
It's also not a bad idea to have another set of eyes. Take a look and see if there's any red flags that pop up. There's a lot of information that could be gleaned from the annual 5500. When you file it, it's made public on the Department of Labor's website. Professionals can glance through it and see if there's anything that pops up as something that may be worth looking into a little bit more.
It's a good idea to also benchmark service. It's a competitive environment out there in the retirement plan space. Advisers, recordkeeping, and TPAs are doing all they can to remain competitive. There may be services out there that you don't know exist, that can help participant outcomes and make your job easier so you can better serve the participants in the plan. I hope this is helpful and insightful as you look at your own plan. If you'd like to utilize your second opinion service, we're just have questions. Feel free to reach out to us. This is not intended to be tax or legal advice. If you need tax or legal advice, reach out to appropriate professionals.