Retirement Plan Administration Best Practices

Retirement plan sponsors have a difficult challenge: balancing the desire to offer a valued and valuable retirement plan to their employees, with the administrative and regulatory requirements and expense of maintaining the plan.

Experts agree that plan sponsors can help address these issues by consistent adoption of plan administration and oversight best practices.These steps can lower costs, increase plan enrollment, boost savings rates, and better prepare employees for a more secure retirement, while helping mitigate the risk borne by plan fiduciaries.

Industry best practices suggest that plans be put out to bid every three to five years. Putting plans out to bid allows plan sponsors to take advantage of changing conditions and overall marketplace competition. This ensures they are offering their employees a cost competitive plan and one where a record keeper uses current technology for both the plan and its participants.

A three- to five-year frequency does not have to needlessly burden organizations with the time, expense, and energy of managing the bidding process, as there are steps that can be taken to minimize disruption to the plan.

According to our 2014 Retirement Survey Report, twenty-two percent of survey participants said they have never put their plan out to bid, with an additional 24% saying they were unsure how often they put their plan out to bid. By contrast, nearly 37% of survey participants said they put their plans out to bid every three to five years.

In response to a related question, 49% of survey participants said their plans had experienced a change in either an investment manager or fund offered to employees within the past year. While survey data did not indicate the reason for this high frequency of change, it may suggest either dissatisfaction with plan management or performance or ongoing interest in market changes in plan offerings or management. Following industry best practices of going out to bid every three to five years would seem a reasonable strategy to ensure access to a cost-effective, well managed plan without having to “shop around” too often.

If you have any questions about  this article, the 2014 Retirement Survey Report, or would like to begin talking to a dedicated retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.