External benchmarking helps the plan sponsor identify areas where their plan is behind peers in the industry and sets goals for plan growth and improvement. Internal benchmarking helps plan sponsors measure internal changes over time, and can help determine if the plan sponsor is meeting the goals for plan growth and improvement.
Identifying similar plans will be most useful in external benchmarking. Some of the comparators plan sponsors can use to identify peers will be plan asset size, numbers of participants, optional features offered—such as auto enrollment, loans and self-directed brokerage accounts. Once a plan sponsor’s peers are identified, comparisons can be made. Plan sponsors should find the areas where their plan is significantly different from their peer group and they will have a good start for developing goals, strategies and action steps for improvement.
Once strategies are implemented, plan sponsors should evaluate the effectiveness of their efforts. For instance, was an education program developed that was intended to help non-participants understand the benefits of enrolling? If so, plan sponsors should measure overall participation at the beginning and end of the education period to see if participation has increased.
Other areas where plan sponsors may want to benchmark include:
- Participant demographics, e.g., participation by age, gender, ethnicity, department, etc.
- Contribution rates
- Average account
- Fees and charges
- Investment diversification