How Should Plan Success Be Measured?

March 29, 2013 ( – How to determine whether a plan is successful or not is a key conversation for advisers to have with sponsors.

According to the PLANSPONSOR Defined Contribution (DC) survey, 65% of plan sponsors said they look to participation rates. Deferral rates (25%), savings to the match (19%), advice tools (10%) and employee satisfaction surveys (18%) were other measures used to benchmark plans. However, more than a quarter (28.5%) of plan sponsors said they were not using any measures at all to assess plan effectiveness.   

At PLANADVISER’s 2013 Top 100 Retirement Plan Advisers seminar in New York, panelist Steve Glasgow, senior vice president of Avondale Partners LLC, said to measure a plan, he would hope to ensure that all participants are saving at a healthy clip. Citing Shlomo Benartzi, the behavioral finance authority, Glasgow noted that participants need to adhere to a 90/10/90 formula: a 90% participation rate, a 10% deferral rate, and 90% of participants invested an asset-allocation option. “If we can get them to those numbers,” he said, “we’ll achieve what we set out to achieve.”   

“I love the idea of gap analysis,” Glasgow said, noting that the calculations sometimes do not factor in the individual accounts that have been in the plan for only a few years. However, he sees room for improvement. “Participants are more moved by, ‘What is my estimated income stream?’ Gap analysis does not say in today’s dollars, ‘Here is what you are going to have to live on in retirement.’”   

Glasgow noted that the appeal of wanting to help take care of participants can also conflict with a company’s cash flow needs, and fiduciary responsibility means the company needs to balance the two sides. “Everybody agrees, when we bring it up, that inertia is the issue you have to overcome,” he said.   

“Whether it’s deferral rates or participation rates, so many people never come back after the initial enrollment,” he stated. “We keep coming back to building plan architecture so people don’t have to come back to make decisions.”    


Jill Cornfield