For plan sponsors, evaluating the effectiveness of a company-sponsored retirement plan is critical to ensuring that it supports employee financial security, complies with fiduciary responsibilities, and aligns with organizational goals. This article outlines key metrics to assess plan performance, including how a plan advisor can help support this evaluation.
Participation and deferral metrics provide a foundational view of plan engagement. High participation rates typically reflect effective communication, automatic features, and employee understanding of the plan’s value.
Key metrics to monitor:
To improve these numbers, sponsors can implement automatic enrollment and escalation features, coupled with targeted outreach to under-participating segments of the employee population. Education campaigns focused on long-term benefits and employer match incentives can also help move the needle.
Evaluating how participants allocate their investments reveals whether the plan supports informed, diversified decision-making. An effective plan design promotes appropriate asset allocation through tools such as target-date funds and model portfolios.
Key metrics to monitor:
A disproportionate use of cash-equivalent or ultra-conservative funds may indicate a lack of investment education. Similarly, high allocations to employer stock can create undue risk for participants. Sponsors should consider evaluating whether the fund lineup encourages diversification and is easy for employees to navigate.
Assessing retirement readiness focuses on whether participants are on track to meet future income needs. Projections can be based on age, savings rate, current balance, and investment performance.
Key metrics to monitor:
Plan providers often offer participant-level readiness assessments and scorecards. Aggregated data from these tools can be used to inform plan design decisions and guide future participant education strategies.
A cost-effective plan balances service quality with reasonable fees. Sponsors have a fiduciary obligation to regularly review and benchmark all plan-related costs.
Key metrics to monitor:
Transparency is key. Sponsors should maintain a documented process for reviewing service provider contracts and evaluating whether fees remain competitive. Fee reasonableness doesn’t mean being the lowest-cost provider—it means ensuring participants are getting value aligned with the services delivered.
Effective plans operate within regulatory guidelines and maintain appropriate governance structures. Regular fiduciary reviews and documentation are essential to reduce legal and financial risk.
Key elements to assess:
Governance structure should also include periodic training for committee members and scheduled plan reviews to ensure continued alignment with ERISA requirements and best practices.
A qualified retirement plan advisor serves as a strategic partner in maintaining and improving plan effectiveness. The advisor’s role extends beyond investment selection and compliance—they support fiduciary governance, employee education, and ongoing benchmarking.
An experienced plan advisor can assist with:
Engaging an advisor with a fiduciary standard (e.g., acting under ERISA 3(21) or 3(38)) can also help mitigate risk and ensure decisions are made in the best interest of employees. Additionally, advisors often serve as intermediaries between sponsors and providers, ensuring service levels are maintained, communications are effective, and all plan stakeholders stay aligned on key objectives. Their regular reporting and industry benchmarking can bring outside perspective to plan performance and offer proactive suggestions for enhancement.
Plan effectiveness should be assessed regularly through structured reviews. Quarterly monitoring and annual deep-dive evaluations enable sponsors to identify trends, address issues, and adjust the plan design as needed.
Suggested review cadence:
Effective sponsors treat retirement plans as a living strategy—adjusting as participant demographics, market conditions, or business priorities shift. Plan success is not static; it’s the result of deliberate design, diligent oversight, and continuous improvement.
Measuring the effectiveness of a retirement plan requires a multifaceted approach, combining quantitative analysis with strategic oversight. By tracking relevant performance indicators and partnering with a qualified advisor, plan sponsors can ensure their retirement program supports employee outcomes, fulfills fiduciary responsibilities, and delivers long-term organizational value.
Plan sponsors can review the following resources for additional information and perspective on measuring retirement plan effectiveness:
U.S. Department of Labor (DOL) – Retirement Plan Sponsor Guidance
A go-to resource for understanding fiduciary responsibilities, plan fees, and compliance. Website: https://www.dol.gov/agencies/ebsa.
Key sections to explore:
Employee Benefit Research Institute (EBRI)
Nonprofit organization offering in-depth, data-driven research on retirement plan trends, participant behavior, and savings adequacy. Website: https://www.ebri.org.
Helpful reports:
Plan Sponsor Council of America (PSCA)
Offers benchmarking reports, surveys, and best practices specifically for plan sponsors.
Website: https://www.psca.org.
National Association of Plan Advisors (NAPA)
An arm of the American Retirement Association, NAPA publishes regular updates, policy insights, and trends relevant to plan sponsors and advisors. Website: https://www.napa-net.org.
Center for Retirement Research at Boston College
Offers academic-level insights and modeling tools related to retirement preparedness and income adequacy. Website: https://crr.bc.edu.
Informational Resources: PlanSponsor: “The Why, What and How of Plan Benchmarking” (January 2, 2025); Capital Group: “Benchmarking For Retirement Plan Performance” (March 11, 2025); Capital Group: “Is Your Defined Contribution Plan Successful?” (October 28, 2024).