What makes your retirement plan successful?
Success depends on what objectives an employer has when establishing the plan. It depends on how much sponsors understand about the plan and the amount of work required from HR to manage the plan. Success also depends a great deal on how much the employees understand the benefit that is provided to them. It depends on if they take advantage of the benefit and feel like their plan is providing the resources to help prepare them for retirement. Success is measured by several factors.
The first step in creating the right employer sponsored retirement plan and in reviewing an existing plan is to create a clear vision of what you consider a successful retirement plan. Too often, plans are set up without a clear vision, then ultimately unravel because of service issues, fees, investment performance expectations, etc.
Success doesn’t rest solely on your organization’s or your specific goals and objectives. Employees are the main beneficiary of an effective retirement plan. After all, ERISA stands for Employee Retirement Income Security Act. In addition to those directly involved or affected by the plan, are the ERISA regulatory agencies that oversee workplace plans. A plan is not successful unless it can demonstrate the ability to meet the regulations set forth by ERISA and the Department of Labor.
These are a few success factors for an ERISA plan from the 401k Service Solution™:
|PLAN SPONSOR||EMPLOYEE||DEPARTMENT OF LABOR|
|Ease of administration||Understanding how much they should be saving||Sponsor meeting fiduciary responsibilities|
|Full understanding of requirements||Ability to save for retirement||Plan providers and investments selected and monitored according to a prudent process|
|Simplified management||Plan helping to achieve retirement goals||Expenses being monitored and checked against industry averages|
|Assistance with fiduciary obligations||Investment options made simple||Participants making informed investment decisions|
|Successful compliance tests||Education material on topics of importance to participants||Documentation available showing fiduciary decision-making processes|
|Competitive investment returns||Easy to understand and make changes|
|High participation rates|
|High contribution rates|
|Employee understand and appreciate benefit|
As a plan fiduciary, the most prudent thing you can do to ensure ERISA compliance is to fully document the decision-making process to demonstrate the rationale behind the decisions made at the time they are made. The Vision Session™ is the first step in this process. By completing this step, you will clearly define the criteria you set forth for plan type, service, fees, investments, administration, employee communication, and fiduciary review. This step will also give you the documented reasons necessary for making any changes on your plan as you evaluate it against a clear set of expectations and the summary will provide guidance to move you in a direction toward plan success and lay the groundwork for all future decisions on your plan.