Measure Twice (at Least)

While it is imperative that plan sponsors continually gauge the success of their plans, some methods of measurement appear to work better than others.

The most popular way to measure a plan’s success is by looking at its overall participation rate among eligible employees (64% of plans do so). This figure is easy to track, usually features very prominently on plan reports and is an obvious sign of a plan’s acceptance by employees. However, those plans that report they use the overall participation rate as an indication of their program’s success show only a slight improvement over plans not using this measurement: Participation rates are just 2% higher, deferral rates 7% higher, and average plan balances a negligible 0.5% higher (see table 1. under “Measurement Use vs. Outcomes,” next page).

On the other end of the spectrum are some measurements seldom applied that appear to have a substantial, positive impact. Approximately 80% of plan providers in our Recordkeeping Survey* say they are able to provide retirement income estimates on statements and/or websites, yet very few plans use the projected income replacement ratio or projected monthly income in retirement as a success measure (6% and 4% of plans, respectively). These plan sponsors have significantly higher average participation and deferral rates, though, as well as higher account balances, than plans that do not use these measurements (see tables 5. and 6., next page).

This is not to say that plan sponsors should stop paying close attention to plan participation or to any other success gauge they may currently use. However, it might be a good idea to add some other factors to the mix.

*Sources: PLANSPONSOR 2013 Defined Contribution and 2014 Recordkeeping surveys

More info: surveys@assetinternational.com