A New Approach to Assessing Plan Health
Often times plan reviews and health reports focus on plan metrics in terms of averages – average participation rate, account balance, deferral rate, etc. This is especially prevalent now in the age of automation. While these metrics give a glimpse into the state of the retirement plan, they also tend to hide problems. For example, high balances or deferral rates of a select few can skew averages and offset the lower rates and small balances held by the majority.
So how can plan sponsors ensure they’re getting a true picture of their plan’s health and success? By diving deeper into metrics that more closely correlate to retirement outcomes. Instead of sticking to generalities and averages, plan providers can be tasked with breaking down plan health data by more specific factors such as:
- Participation and deferral rates by age, tenure, position, compensation and division
- Employer match maximization
- Hardship activity and loan utilization
- Lump sum distributions vs. rollover activity
- Participant website and call center usage
- Plan investment utilization
Getting a more meaningful look into plan participation and activity will help make areas of plan weakness more visible. By knowing where these weak spots are, retirement plan education, communication and design can be structured to enhance the plan for all employees and help boost retirement readiness success.
The depth and usability of information available in the retirement plan industry continues to increase as retirement plan providers and payroll systems become more synchronized with one another. Therefore, your provider’s reporting capabilities may be limited based on your plan set up. To learn more about how to best analyze your retirement plan and help increase your plan’s retirement readiness outcomes, contact a member of Assurance Financial Services.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Assurance Financial Services, Ltd and Assurance Agency, Ltd are not affiliated with Kestra IS or Kestra AS. Assurance Financial Services, Ltd is a wholly owned subsidiary of Assurance Agency, Ltd.
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