All of our engagements start with the end in mind -- what does the client use to define the retirement plan's success?
So...what do you think is a successful retirement plan? Ever thought about it? Here are some ways to think in terms of defining your organization's plan's success. (If you haven't thought about it, click here for our white paper on the subject.)
In order to stay relevant, the retirement plan industry comes up with "important" issues and new "useful" features from time to time. Sometimes it's more along the lines of the battle of who could care less, and then other times it's relevant to the conversation that good advisors are having with their clients. The recent trend: Retirement Readiness, meaning the retirement plan industry figured out it's all about whether or not people get to the finish line. This is one example of how an organization could define retirement plan success -- how many people are on track to retire "on time" and with a predetermined % of their current income?
Another metric that is often used is participation rates and deferral rates. Many organizations will define their plan's success if the employees using it are saving at a higher rate than average, either the number of employees involved in the plan or the % they are saving.
One idea that isn't as easy to measure is how much strain the plan puts on the company from an administrative standpoint or from a financial perspective. Organizations need the plan to do what it was intended to and not create undue burden as a result. (This isn't easy to define without a longer conversation, so we'll leave it at that for now.)
Employee engagement and happiness is another indicator of plan success for many of the organizations we work with. (We typically work with companies that value their company culture and see their plan as an extension of it.) The organization is often looking for key indicators that employees feel like they understand and appreciate the plan, they are using the plan to their best extent, financial education is provided to keep them financially fit, and meetings are well-attended.
Whatever your organization uses to measure success is the right answer for your plan; it's also the most important thing you can define. Using the success statement as a starting point, you can construct a plan that fits your organization from culture to back office with the right vendors and the right design. Take a minute to define your plan's success measures and use those as a guiding force when making plan decisions about vendors, investments, plan design, even hiring an advisor or consultant.
Never thought about it before? Not sure what the best success measures might be for your plan? Struggling to work with committee members that have different objectives? That's where we come in. Reach out for assistance or Click Here to download our white paper on Plan Success.