Maintaining a 401(k) plan is a lot like maintaining a well-built home. Even when everything looks
fine on the surface, small issues can develop quietly over time—cracks behind the walls, rising utility costs, shifting foundations. Regular benchmarking is the routine inspection that keeps your plan structurally sound, cost‑efficient, and aligned with what participants need to retire confidently.
Benchmarking simply means comparing your plan’s fees, features, investment lineup, and participant outcomes against current industry standards. It’s an essential way to make sure fees remain fair and transparent, investment options stay competitive, and participant engagement stays strong. Many companies once reviewed their plans every three years, but with rising fiduciary lawsuits and faster‑moving markets, annual reviews have become the new norm.
These reviews can uncover meaningful opportunities. For example, unchecked fees—even something like 1.5% instead of 0.1%—can quietly siphon away hundreds of thousands of dollars in participant savings over a career. Likewise, outdated investment options may lag behind the market when better, lower‑cost alternatives exist. And in some cases, simple enhancements—like adding Roth features or auto‑enrollment—can dramatically boost participation. One employer saw enrollment jump to 98% after implementing auto‑enrollment and escalation strategies.
Benchmarking also strengthens fiduciary defense. Under the Employee Retirement Income Security Act, plan sponsors must act prudently and in participants’ best interests. Regularly comparing your plan to peers provides documentation of due diligence and supports peace of mind for committees and leadership teams. Studies have shown that 84% of U.S. retirement plans have at least one infraction or fiduciary issue—often because the plan wasn’t reviewed thoroughly or often enough.
But fees and funds are only part of the picture. Good benchmarking looks at participation trends, contribution levels, and readiness metrics. These insights help you spot gaps early—like low engagement or signs that employees aren’t saving at levels that support long‑term financial security. Strong retirement readiness doesn’t just benefit employees; it also reduces costly delayed retirements, which research shows can cost employers more than $50,000 per year per employee in added expenses and productivity drag.
All of this aligns with broader benefits benchmarking trends. As employers update health, wellness, and compensation programs annually, more are bringing that same rhythm to their retirement plans. This approach also makes RFP timing smarter: you only run full provider comparisons when benchmarking suggests it's truly needed, saving time and avoiding unnecessary churn.
Think of benchmarking as preventive care for your retirement plan. It helps you spot hidden risks, reduce long‑term costs, and uncover improvements before issues turn into problems. And just like maintaining a home, staying ahead is always easier—and more cost‑effective—than repairing damage later.
A proactive, well‑documented benchmarking process keeps your plan healthy, defensible, and competitive. If you haven't reviewed your plan in the last year, now is a great time to start. And if you’d like support, don’t hesitate to bring in an expert to help evaluate your plan and guide your next steps.
