As anyone who works in the retirement industry can tell you, there is no one right plan design for every employer. In fact, there may be multiple plan designs that can work to achieve the same outcome for a single employer.
Still, many best practices are generally agreed upon across retirement plan management; a company embracing these practices demonstrates that it is offering its plan to create a true benefit—one that will help its employees save and retire successfully and is not just one of a check-box list of benefits. The chart “Best in Class vs. Other Plans,” on page 28, highlights the differences.
Last year, PLANSPONSOR introduced its Best in Class 401(k) Plan designation, given to 401(k) retirement plan sponsors that meet the highest standard of excellence as deemed by our research and editorial teams. Recipients of the 2016 designation were selected from the more than 4,500 401(k) plans that responded to the 2015 PLANSPONSOR Defined Contribution (DC) Survey. Last year, on the inaugural list, we had 29 plans; this year, we add 26 more (plans may be recognized only once).
Like all benchmarks, especially in an industry as continuously evolving as that of employer-sponsored retirement plans, the standards for “Best in Class” are subject to change. For example, a 401(k) plan that might have been called superior just a few years ago may lack features that would be expected in today’s best plans. Therefore, as we noted last year, as the industry evolves, so will PLANSPONSOR’s Best in Class criteria and scoring methodology, which will be reviewed annually and changed as necessary to properly reflect industry best practices.
When determining the scoring and criteria for this year’s entries, Brian O’Keefe, director of research and surveys at Asset International, PLANSPONSOR’s parent company, targeted plans that:
- show a commitment to plan success through strong oversight and governance practices;
- produce strong outcomes related to helping employees prepare for retirement (i.e., high participation and/or deferral rates);
- go beyond just helping people save for retirement to helping them succeed financially; and
- use features that make it easier, not harder, for participants to achieve their savings goals.
This year, as last, in order to find plans that met those four goals, the research team used a combination of a fixed and a sliding scale across a range of criteria. Readers familiar with our annual Defined Contribution (DC) Survey know the breadth of the topics included in the questionnaire. Therefore, the Best in Class 401(k) Plan criteria can include enrollment features, employer contributions, investment choices, participant advice and education, and plan oversight/governance aspects.
Plans needed to have certain features to be considered, such as an investment policy statement (IPS), while other criteria such as automatic enrollment, short eligibility schedules and immediate vesting were not mandated but did earn the plan additional points. This variability allows a range of plan sizes to be included as well. For example, as auto-enrollment is more common at large plans, having it as a “must” would have eliminated nearly all small and micro plans from Best in Class contention.
The 26 plans we recognize as Best in Class represent diverse industries and participant demographics and the differing plan-size categories show the range of plan design options that can produce positive retirement outcomes. Overall, this news is promising for/this diversity should seem promising to plan sponsors looking to improve their plan’s outcome or to help attract and retain talent. It affirms that any organization, regardless of size or resources can have a great 401(k) plan. As O’Keefe notes, “While the 2016 winners share some common traits, none are identical in terms of offerings or design. From that perspective, there’s no express lane to the top of the mountain, but there are many trails that lead there, to create a smart plan.”
PLANSPONSOR is pleased to share the second “class” of companies winning its Best in Class 401(k) Plan designation and to offer snapshots of each. —PS