Education

By Mark Olsen, Managing Director at PlanPILOT

Every plan committee has had this conversation. Enrollment numbers come in low, deferral rates stall out at 3%, and half the workforce hasn’t touched their beneficiary designation in years. Someone on the committee chalks it up to apathy. “People just don’t care about their retirement.”

That explanation is comfortable, but it’s wrong. In our experience, participant behavior isn’t random, and it isn’t apathy either. It follows patterns that are well documented, highly predictable, and (this is the important part) responsive to plan design. 

If your workforce isn’t engaging with the retirement plan or the broader benefits package the way you’d expect, the problem usually isn’t the people, it’s the environment they’re navigating.

Behavior Follows Predictable Rules

Decades of behavioral economics research point to a handful of forces that shape how people interact with retirement plans, and none of them have much to do with how much someone values their financial future.

Inertia is the biggest force. Left alone, most people stick with whatever default they were handed, whether that’s a 3% deferral rate, a plan’s original investment lineup, or a beneficiary form filled out on their first day. Changing course takes effort, and effort competes with everything else on an average day.

Choice overload plays a similar role. A benefits packet with a dozen elections, a fund lineup with 30 options, and a login portal that requires three separate passwords doesn’t come off as a high priority to a new hire; it reads as a task to postpone.

Present bias further compounds friction. Retirement is decades away for a lot of employees, and people are wired to prioritize this month’s paycheck over a benefit that pays off decades later. Combine that with limited financial literacy, and it isn’t hard to see why so many participants typically do nothing at all.

This is just how human cognition operates, and it shows up the same way across income levels, education levels, and industries. A finance director with an MBA is just as likely to leave a beneficiary form untouched for a decade as a first-year employee on the warehouse floor. The obstacle isn’t knowledge, it’s friction.

That’s an important distinction for how committees respond. Blaming apathy leads to more emails, more brochures, and more “financial wellness” webinars that draw the same handful of already-engaged attendees. Addressing friction leads to a somewhat different focus: to the plan document, the enrollment process, and the defaults themselves, which are likely the true source of the problem.

Why This Should Concern Plan Sponsors

Under ERISA, plan sponsors owe participants a fiduciary duty that extends beyond maintaining a compliant plan document. There is a practical dimension to that duty as well; a benefit nobody uses actually fails to fulfill its purpose, no matter how well designed on paper.

For plan sponsors, low participation and inadequate deferral rates also directly threaten regulatory compliance. When highly compensated employees (HCEs) participate at significantly higher rates than non-highly compensated employees (NHCEs), the plan risks failing annual ADP/ACP nondiscrimination tests. This gap can lead to costly corrective measures or forced refunds to HCEs, turning engagement into a core governance issue rather than just a communication challenge.

The same dynamic shows up outside the retirement plan. HSAs may go unfunded, even when the employer contributes to them. Life insurance beneficiary and other elections get skipped during open enrollment and never revisited. Wellness benefits and disability coverage sit unused, not because employees don’t value protection, but because the decision to enroll seemed too complicated to act upon. Employers spend real money on benefits that a large share of the workforce never experiences, and that discrepancy between what’s offered and what’s actually used should concern a committee as much as fund performance does.

What Actually Moves the Behavior Needle

If inertia and complexity are the primary obstacles, the fix isn’t a better brochure. It’s redesigning the environment participants operate within the plan. Here are several considerations:

• Make the default the optimal choice: Implement automatic enrollment and automatic escalation to shift the path of least resistance from opting-in to enrolling and remaining enrolled. Target escalation caps (e.g., auto-escalating up to 10%–15%) helps participants steadily build retirement readiness. This assists in overcoming stagnant inertia.
• Minimize decision fatigue: Streamline fund lineups, utilize Qualified Default Investment Alternatives (QDIAs) (such as Target-Date Funds) as genuine hands-off options and shorten enrollment forms to eliminate cognitive friction.
• Align timing with key decision windows: Deliver communications during onboarding, open enrollment, or annual raise cycles when employees are actively evaluating their financial choices, rather than relying on routine quarterly newsletters.
• Segment targeted messaging: Tailor content by career stage, highlighting compound growth and low-barrier entry for early-career hires, while focusing pre-retirees on catch-up contributions and retirement distribution planning where such topics are more relevant and useful.
• Track behavioral metrics alongside performance: Evaluate participation rates, average deferral rates, and default-fund utilization in committee meetings right next to investment performance benchmarks. If nobody tracks engagement, nobody is accountable for it.
• Integrate cross-benefit experiences: Provide a unified enrollment experience across 401(k), 403(b), HSA, life insurance, and wellness offerings to prevent siloed friction points across different platforms.

Building a Plan That Works With Human Nature

None of this requires overhauling the plan or adding significant cost. It does require committees to stop treating low engagement as a mystery and start treating it as a design problem with possible solutions.

Plans seeing real participation gains don’t always have the flashiest communications. They’re the ones structured around how people actually behave, not how a committee wishes they would.

Is Your Plan Designed for How Participants Actually Behave?

We’re creating the standard for client experience. Independent and impartial by design, we apply our skill to every facet of plan development, governance, and implementation to help you enjoy real results for your organization and its participants. Our client partnerships are built on trust, communication, and responsibility, the cornerstones of a healthy, prosperous relationship. We’re committed to objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

PlanPILOT’s team of seasoned professionals upholds high professional standards, so every strategy we recommend supports both your organization and the participants who depend on it.

To learn more about how we can help improve participant behavior and the effectiveness of your benefits program, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Every retirement plan committee eventually asks some version of the same question: 

How does our plan compare? 

The usual response is to pull a benchmarking report, scan a page of averages, and file it away until next year. But a report full of averages only tells you something useful if those averages reflect plans that resemble yours.

A plan can look perfectly healthy next to a broad industry average and still be behind the institutions it should really be measured against. Before a committee can trust its own benchmarking results, it needs to ask a question other than “Are we average?” 

It needs to ask: Average compared with what?

This type of insightful question is typical of what PlanPILOT asks our plan sponsor clients. Our consultants go “beyond average” to elevate employee benefit programs to higher standards of excellence. Let’s look at the prudent method of using benchmarks to evaluate your plan.

Require a Relevant Peer Group, Not Blended Averages 

Benchmarking only produces useful insight when the comparison is relevant. A plan sponsor needs to know the type of plan, the peer group, the asset size, the participant base, the industry, and the service model behind the numbers they’re reviewing.

A higher-education 403(b) plan with a multi-vendor history or unique participant demographics doesn’t behave like a corporate manufacturing 401(k), and a $50 million plan doesn’t carry the same fee structure or service needs as a $500 million plan. 

When a benchmarking report lumps all of these together into one blended average, the results can be misleading in either direction: a plan may appear to be doing better than it is, or it may look like an outlier when it’s actually performing well for its size and structure.

Committees should ask their consultant or recordkeeper how the peer group was built before drawing conclusions from a report. If a plan can’t be tied to institutions of similar size, structure, and participant demographics, the comparison isn’t telling the committee much.

Evaluate Total Value, Not Just Bottom-Line Cost 

Cost is an easy number to point to, and it’s tempting to make an entire benchmarking exercise about who charges less. That’s a mistake. Fees should be evaluated in relation to what they’re paying for: recordkeeping support, investment options, participant education, technology, and fiduciary assistance.

Low fees alone don’t tell a committee very much. The better question is whether participants and the plan are receiving fair value for what they pay. 

A plan that pays slightly more for a recordkeeper with stronger service and better technology may be in a stronger position than one chasing the lowest number on a fee schedule. Committees that focus only on cost risk trading away real value for a number that looks good on paper but doesn’t hold up once you look at what’s being delivered.

Connect Benchmarking to Your Fiduciary Process

Benchmarking works best when it’s treated as part of an ongoing, prudent process for managing the plan, not a report that gets reviewed once a year and set aside. Committees should document what they reviewed, which comparisons were used, why those comparisons were appropriate for their plan, and what actions were considered as a result.

This kind of documentation matters beyond the meeting where it happens. A consistent, well-documented review process gives a committee something to point to if its decisions are ever questioned, and it gives new committee members a clear record of how and why past decisions were made. Good benchmarking helps demonstrate that a committee maintains a prudent, repeatable process for evaluating the plan, helping fulfill and document its fiduciary obligations under ERISA.

Turn Data Points Into Actionable Committee Decisions 

A benchmarking report that sits in a file folder hasn’t done its job. The real value of benchmarking is the clarity it gives a committee about where the plan stands and what should happen next.

Depending on what the comparison shows, that might mean renegotiating fees with a recordkeeper, reviewing the investment lineup, conducting a vendor search, updating plan design features, improving participant communication, or revisiting governance practices. Not every benchmarking cycle will call for a major change. Some years, the right decision is simply to confirm that the plan remains well-positioned and to document why. 

Either way, the process should end with a decision, not just a data point. We recommend implementing a Committee Action Checklist as follows:

Questions Your Committee Should Ask Before Reviewing a Benchmarking Report

• What specific demographics, asset sizes, and industry types comprise this peer group?
• Are recordkeeping fees being evaluated in light of bundled services, technology quality, and participant support?
• Does this report include actionable recommendations that can be formally documented in our meeting minutes?

Benchmarking Is a Process, Not a Snapshot

Retirement plan committees carry a lot of responsibility, and benchmarking is one of the clearest tools available for demonstrating that a plan is being managed with care. But the value of that tool depends entirely on what it’s measured against. A plan compared to the wrong peer group, or judged only on cost, can leave a committee with a false sense of confidence, or an unnecessary sense of alarm.

Getting the comparison right takes some work up front: identifying the right peer group, evaluating fees alongside services, documenting the process, and following through on what the results actually recommend. That work is what turns benchmarking from a compliance exercise into a genuine part of managing a retirement plan well.

Ready to Benchmark Your Plan the Right Way? Talk With Us.

At PlanPILOT, we help retirement plan committees build a benchmarking process that reflects their plan, not a generic average. As an independent consulting firm, we’re not affiliated with any investment funds, recordkeepers, or other service providers, so the comparisons we help build are based on what’s right for your plan and your participants, not what benefits a provider may offer.

Our team works with committees to identify a genuinely comparable peer group, evaluate fees against the services being delivered, and document a process that holds up to fiduciary scrutiny.

To learn more about how we can help you build a benchmarking process built around your plan, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com.

Frequently Asked Questions

How often should a retirement plan be benchmarked?

Most plans benefit from a formal benchmarking review at least every one to three years, though larger or more complex plans may review certain elements, such as recordkeeping fees, on an annual basis. The right frequency depends on plan size, how recently vendors or investments were reviewed, and whether any major changes have occurred within the plan or its participant base.

What’s the difference between benchmarking fees and benchmarking the plan as a whole?

Fee benchmarking looks specifically at the cost of recordkeeping, investment management, and advisory services compared with similar plans. Benchmarking the plan as a whole takes a wider view, comparing plan design features, participant outcomes, service levels, and governance practices against relevant peers, not just the numbers on an invoice.

Does a lower-cost plan automatically mean a better plan?

Not necessarily. A lower-cost plan can be a good outcome, but cost is only one part of the equation. A plan that pays somewhat more for stronger recordkeeping support, better technology, or more effective participant education may deliver better outcomes than a plan that simply has the lowest fees on paper.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Demand for Outsourced Chief Investment Officers (OCIO) has skyrocketed in recent years, and a growing number of retirement plan sponsors are looking to free up internal resources by outsourcing this role. At PlanPILOT, we offer many services to help clients find the right OCIO for their needs, including a proprietary database of educational content that can be utilized throughout the outsourcing process.