When companies think about attracting and retaining top talent, compensation usually comes to mind first. But in today’s labor market, especially in industries facing skilled labor shortages, employees are looking at the full picture. A retirement plan that falls short of what competitors offer can quietly work against your recruiting and retention efforts, even if everything else is in order.
Benchmarking your retirement plan is one of the most practical steps you can take to make sure that doesn’t happen.
What Benchmarking Actually Means
Benchmarking a retirement plan means comparing your plan’s features against those offered by employers in the same industry or a similar one. The goal is to understand where your plan stands and whether it’s positioned to help you compete.
The features typically evaluated include:
- Eligibility requirements
- Employer contribution structure and match formula
- Deferral options (pre-tax, Roth, after-tax)
- Vesting schedules
- Investment options
- Distribution options
- Plan fees
For employers in industries where qualified talent is in short supply like trades, construction, biotech, and others, this kind of review is especially important. A strong retirement benefit won’t be the primary reason someone accepts a job offer, but a weak one can absolutely be a reason they decline it or leave for a competitor.
What Employees Expect Today
Employees today are looking beyond base compensation when evaluating job offers. In industries where pay between employers is relatively similar, benefits become a meaningful differentiator. A well-structured retirement plan signals that a company is invested in its employees’ long-term financial wellbeing, and that matters to people.
A competitive retirement benefit may not be the reason someone chooses to join or stay, but it will not be a detractor. In competitive hiring environments, eliminating detractors is just as important as adding perks.
What a Competitive Plan Looks Like
There is no single formula for a competitive retirement plan. What’s considered strong varies by industry, company size, and workforce demographics. Startups and smaller companies, for example, often can’t offer employer contributions and may lean on equity-related compensation instead. For larger, more established employers, the bar is generally higher.
That said, a few areas consistently matter most:
- Employer Contributions: The structure and generosity of your match or other non-elective contribution is often the first thing candidates and employees compare. Understanding what peers in your industry are offering helps ensure your formula is positioned correctly.
- Vesting Schedule: A vesting schedule that’s too long can feel punitive, particularly to candidates who’ve come from competitors with more favorable terms. Reviewing this against industry norms is worthwhile.
- Deferral Options: Offering both pre-tax and Roth deferral options has become an expectation in many industries. Under the right circumstances, after-tax contributions can also add value for employees looking to maximize savings.
- Investment Menu and Fees: Plan fees should be benchmarked at least annually against plans of comparable size and structure. Paying more for better technology, participant guidance, and educational resources is reasonable when it leads to better outcomes. But fees that are higher than peers without a corresponding benefit are a problem worth addressing.
Reading the Signals Inside Your Plan
You don’t always need to look outward to know if your plan is resonating. Your own plan data tells part of the story.
Low participation rates and low employee deferral levels are both signs that employees aren’t engaged with the plan. That can point to gaps in plan design, communication, or education. On the other hand, high participation and healthy deferral rates typically indicate a plan that employees understand and value.
These internal data points, reviewed alongside external benchmarking, give you a more complete picture of where the plan stands and where it could be stronger.
How a Retirement Plan Advisor Can Help
One of the most valuable things a qualified retirement plan advisor brings to this process is access to data that most plan sponsors simply don’t have. Advisors who work with a broad range of clients can draw on both external market data and internal benchmarks to give you an accurate comparison; not just general industry averages, but insights from plans that closely resemble yours.
Beyond data, a good advisor brings experience interpreting what matters most in your specific situation. They can model the cost of potential changes such as adjusting your employer contribution formula or modifying a vesting schedule, before you commit to anything. They can also identify opportunities to design supplemental retirement programs, like non-qualified deferred compensation plans, that can be targeted to key employees your organization most wants to retain.
Proactive advisors don’t just deliver a benchmarking report. They come back with recommendations, negotiate fees on your behalf, and help you implement changes that improve the plan’s overall effectiveness over time.
Taking the Next Step
A retirement plan that was competitive five years ago may not be today. Labor markets shift, plan design norms evolve, and what employees expect from their benefits continues to change. Regular benchmarking keeps you informed and gives you the information you need to make decisions with confidence.
If you haven’t reviewed your plan against current market standards recently, now is a good time to start. The Twelve Points Retirement Plan Advisory team works with plan sponsors to evaluate plan design, benchmark fees and features, and build plans that support both employee outcomes and business goals. Connect with our team to get started.
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