Setting up a group retirement plan is a significant step in providing financial security for your employees. However, many business owners make the mistake of setting it up and then forgetting about it. To ensure that your plan continues to serve both your business and employees effectively, regular reviews are essential.
The Benefits of Routine Retirement Plan Reviews
Retirement plans aren’t static; they should evolve over time as your business grows, employees change, and new regulatory rules are introduced. Regularly reviewing your plan ensures that:
- Fees Remain Competitive: One of the most important reasons to review your plan is to ensure that the fees associated with it remain reasonable. Hidden fees are a common issue, and if they go unchecked, they can erode your employees’ retirement savings.
- The Plan Meets Your Goals: As your business grows and evolves, so do the needs of your employees. Regular reviews allow you to adjust the plan to better meet the needs of your team, whether it’s increasing contribution limits or adding additional benefits like profit sharing.
- You Stay Compliant: ERISA regulations and IRS rules can change over time. Failing to stay updated on compliance requirements can expose you to legal risks. A review helps ensure that your plan remains compliant with all current regulations.
How Often Should You Review Your Retirement Plan?
At Langan Financial we commonly conduct a soft review yearly looking at your plan compared to others in the industry to make sure it’s on par with what we are seeing fees wise. We also recommend a thorough review of your group retirement plan every three to five years. This gives you enough time to assess whether the plan is still competitive and if any changes need to be made. During the review, you should focus on a few key areas:
- Plan Performance: Evaluate how the investments are performing. Are they aligned with your employees’ retirement goals? Are they suitable for the level of risk employees are comfortable with?
- Administrative Costs: Compare the fees you’re paying with those of similar-sized companies in your industry. Are you paying more than necessary?
- Employee Participation Rates: Are employees taking full advantage of the retirement plan? If not, you may need to offer additional education or incentives to encourage participation.
- Vendor Performance: Review the performance of any third-party administrators or recordkeepers. Are they providing the level of service you expect? Are there other vendors offering better service or lower fees?
The Retirement Plan Benchmarking Process
At Langan Financial, we conduct retirement plan benchmarking when reviewing a client’s plan. This involves comparing your plan against others in the same industry or of similar size to see how you measure up. This process helps you determine if your fees are competitive and if the investments are performing at or above industry standards.
In some cases, we may also conduct a Request for Proposal (RFP) to gather live bids from different vendors. This ensures that you’re always getting the best deal and that your employees’ retirement savings are being managed efficiently.
Regular Retirement Plan Reviews Keep Plans Effective
Just like any other aspect of business, group retirement plans require ongoing attention. Regular reviews ensure that your plan stays competitive, compliant, and effective for both your business and your employees. At Langan Financial, we’re committed to helping you navigate this process with transparency and expertise.
