PLANADVISER - January/February 2020 - 9

data points //
Missing the Mark?
Plan success measures are all over the map
A COMPARISON of the results of the 2019
PLANADVISER Practice Benchmarking
Survey and the 2019 PLANSPONSOR
Defined Contribution (DC) Survey: Plan
Benchmarking shows retirement plan
advisers and plan sponsors each have
a different way to gauge whether their
plans are working well.
Plan sponsors and advisers were
asked which of 11 metrics they use to
measure plan success. There were two
that both groups agreed on: participation
and deferral rates. Ninety-two
percent of advisers and 71% of plan
sponsors said participation rate was
the most important yardstick. Ninety
percent of advisers and 60% of sponsors
found deferral rates next most significant
when determining plan success.
Generally, however, advisers indicated
that plans need a better target
Plan Success Metrics
Participation rate
Deferral rates
External/Competitive benchmarking of plan design
% of participants with " appropriate " asset allocations
% of participants meeting retirement income replacement ratio goals
% of participants saving to match
% of participants who increased deferral rates in the prior 12 months
% of participants using advice tools offered through the plan
% of participants meeting projected monthly retirement income goals
Employee satisfaction with plan (determined through survey)
None-does not use any formal plan success measures
than those two popular metrics
provide. While they are a valuable
starting point, in reality, they fail to
reveal, e.g., whether participants are
succeeding or recognize particular
efforts the sponsor made to help them
save more effectively.
One measurement getting much
discussion, though not much plan
sponsor attention, is retirement
income replacement. Nearly twothirds
(63%) of advisers vs. 10% of
sponsors employ this metric. The gap
may narrow, though, as a provision of
the recently passed SECURE [Setting
Every Community Up for Retirement
Enhancement] Act requires defined
contribution plan benefit statements
to include a lifetime income disclosure
at least once during any 12-month
period. As an aside, a consistent
formula to measure income may be
difficult
to find, because providers
each have different methods for
scoring individuals.
Once there is a standard disclosure,
though, will this become a
widely used benchmark, or remain
something plan sponsors see as
outside of their purview?
Advisers could examine the take-up
rate of an employer's match to see
whether participants appreciate their
company's generosity. And they could
benchmark hardship withdrawals and/
or loans to check for financial wellness.
To get the most from available
metrics, advisers may want to teach
their clients the value of setting success
measures-then determine which
metrics best ensure each plan moves
toward its goal. -Judy Faust Hartnett
n PLAN
ADVISERS
92%
90%
70%
65%
63%
57%
51%
44%
43%
32%
1%
n PLAN
SPONSORS
71%
60%
29%
15%
10%
25%
12%
15%
10%
16%
21%
Sources: 2019 PLANSPONSOR Defined Contribution Survey: Plan Benchmarking; 2019 PLANADVISER Practice Benchmarking Survey
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PLANADVISER - January/February 2020

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