KnowHow Archive

Plan Sponsor Guide Participant Guide

Fare Comparisons

Helping participants make sense of those retirement plan statements

There is no better time than the arrival of those fourth-quarter statements to get participants to pay special attention to the status of their retirement savings. Even participants who never pay attention to their retirement plan investments will be inclined to check out the results of this report.
With this month's Know How, we show participants how to calculate a rudimentary rate of return for the participant's investments, using just three numbers from the statement: the beginning balance, earnings recorded during the period, and worker contributions.
With the latter, we employ the traditional half-weighting that, even if it does not strictly adhere to your payroll cycle, offers a workable result for most situations. To the extent your payroll cycle varies from this approach, you may need to adjust these calculations accordingly. Additionally, it might be helpful to provide participants with a set of applicable benchmark returns against which they can compare their own results.
As always, we look forward to your comments.