Blog

By Mark Olsen, Managing Director at PlanPILOT

Every plan sponsor has sat through an investment advisor or recordkeeper review that spends 45 minutes on fund performance and 5 minutes on everything else. That ratio is backwards. The investment menu matters, but it’s one piece of a much larger relationship, and it’s usually the piece that’s easiest to evaluate. The bigger questions, the ones that actually determine whether a plan works, tend to get skipped.

In our decades of experience working with plan sponsors, we’ve seen time and time again where glossing over the critical aspects of an employer benefits plan can come back to haunt plan sponsors later. Let’s examine what a good plan evaluation should include.

Look Past the Investment Menu

A recordkeeper is the active financial interface your employees rely on to enroll, check balances, model retirement income, and decide how much to save. If that experience is confusing, participants will disengage and a strong fund lineup won’t fix that on its own.

Plan sponsors should review and go through the enrollment process themselves and assess how “user-friendly” the plan is: 

• Is it clear how to sign up? What is the process to select investments?
• Can a new hire figure out what percentage to contribute without calling HR? 
• Does the mobile app work as well as the desktop version? 
• Is the provider responsive to inquiries, either in real-time chat or with a phone call?

These questions determine whether people save at all, and whether they save enough.

Service Quality Shows Up in the Details

Recordkeepers tend to look alike in the process of requesting a proposal evaluation. Everyone offers similar technology, similar fund access, similar reporting templates. The differences become apparent later, in how issues get resolved.

When a participant calls with a question about a rollover, how long does it take to get an answer? When HR needs a file corrected before payroll runs, is the recordkeeper’s team responsive, or does the request sit in a queue? Plan sponsors should track this over time rather than relying on impressions from a single call. Service-level agreements are only useful if someone checks whether they’re being met.

Our senior consultants at PlanPILOT work closely with clients on this exact issue: matching the service model a recordkeeper promises during finalist presentations against what shows up six months into the relationship. We can relate stories about how the promise often falls short of reality later on.

The Fiduciary Weight of Data and Reporting

Sponsors need visibility into participation rates by department or location, deferral rate trends, and where employees are stalling out in the savings curve.

Good data doesn’t just sit in a report; it flags problems early, such as: 

• A company location with low enrollment
• An employee demographic group that is under-saving
• A fund with unusually high redemption activity or funds that continually lag their peers in either performance or cost-efficiency

A recordkeeper that surfaces these patterns is doing part of the sponsor’s fiduciary job for them. One that buries the same information in a hundred-page PDF is not.

Benchmarking matters here too. Sponsors should be able to compare their plan’s participation and savings rates against similar plans, not just against last year’s numbers.

Cost Only Means Something Next to Value

Fee benchmarking gets a lot of attention, and it should, but the cheapest recordkeeper on paper isn’t automatically the best choice. Fees need to be weighed against what’s actually being delivered: how responsive the service team is, how strong the participant education is, how good the technology is, and whether outcomes are improving.

A recordkeeper charging slightly more but delivering faster resolution times, better participant tools, and clearer reporting may be the more defensible choice from a fiduciary standpoint. The goal of a retirement plan is better outcomes for participants, and cost is just one input into that objective.

Two More Areas to Add to the Checklist

Cybersecurity deserves its own line item. Recordkeepers hold sensitive personal and financial data on every participant, and the Department of Labor has made clear that cybersecurity practices fall within a sponsor’s fiduciary oversight. 

Ask about data encryption standards, breach history, and how quickly a recordkeeper notifies sponsors if something goes wrong. Under new SEC regulations, those with access to investors’ personal information are required to notify investors as soon as a breach is discovered and within 30 days maximum. As part of their fiduciary duty, plan sponsors will likely be held accountable for making inquiries about a recordkeeper’s cybersecurity protocols.

Transition support is important as well, especially for plans that have changed providers before or expect to again. A recordkeeper’s conversion process, how it handles data mapping, participant communication, and blackout periods, says a lot about how the organization operates day to day. A rocky conversion is often a preview of a rocky ongoing relationship.

What This Means for the Next Review

None of this replaces a fund lineup review; it sits alongside it. A committee that only asks how the funds performed is answering a narrower question than the one that actually matters: 

Is this recordkeeper helping participants save more, understand their options, and reach retirement in better shape than they would otherwise?

That’s a challenging question to score on a spreadsheet, but it’s the one worth asking at the next committee meeting.

Is Your Recordkeeper Meeting the Standard Your Plan Deserves?

Evaluating these operational, data, and security metrics requires time and specialized industry benchmarking. At PlanPILOT, we help plan sponsors look past the standard fund menu to analyze the true value your recordkeeper delivers. Our client partnerships are built on trust, communication, and responsibility, cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

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

To learn more about how we can help evaluate your recordkeeper relationship and strengthen your retirement plan management, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com.

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

Ask a plan committee member what they did at the last investment review meeting, and you’ll likely hear some version of the same story: they pored over performance reports, debated a handful of funds, and walked away feeling like the lineup is solid. It’s a familiar ritual, but also may be the wrong conversation.

In our experience, the size and complexity of a retirement plan’s investment menu is one of the most underexamined levers in plan design. Plan sponsors who build menus around fund ratings and committee preferences often end up with options that are technically defensible but practically confusing. When participants are confused, they disengage. That’s a problem no fund rating can fix.

The better question isn’t whether the funds are good; it’s whether the menu itself is designed to help people make good decisions. That should be the focus of the plan committee.

More Options Don’t Mean Better Outcomes

There’s a persistent belief in retirement plan management that more choice signals more value. If the committee can offer a broad fund lineup (e.g., domestic equity, international equity, sector funds, alternative strategies), it looks thorough, complete and diversified. Sophisticated, even.

Research tells a different story. Studies on decision-making consistently show that when people face too many options, they don’t choose more carefully. They freeze up, defer, or default. In a retirement plan context, that often means sticking with a poorly suited default allocation, failing to rebalance, or avoiding enrollment altogether.

This phenomenon is sometimes called “choice overload,” and it has real consequences for participants. A 401(k) participant who can’t quickly identify which funds belong in their portfolio is less likely to engage meaningfully with the plan. As a result, lower engagement tends to translate into lower savings rates and worse retirement outcomes.

What “Streamlined” Actually Means

Simplifying an investment menu doesn’t mean stripping out useful options. It means organizing the menu with participant behavior in mind—building a clear hierarchy that guides decision-making without requiring expertise.

A well-structured menu typically works in tiers:

1. First, have a qualified default investment alternative (QDIA). This is usually a target-date fund series that serves participants who want a hands-off, age-appropriate option.
2. Then a core tier of broad, low-cost index funds covering major asset classes: domestic equity, international equity, and fixed income.
3. Finally, a supplemental tier for participants who want more specialized options: active strategies, real assets, lifetime income, or additional diversification options.

This kind of structure doesn’t limit participants; it orients them. Someone with no investment background can find a reasonable path without feeling lost. Others who want to customize have the tools to do so. Both groups are better served than they would be by a flat list of 30 funds with no clear organizing logic.

The Fiduciary Case for Simplicity

Beyond participant outcomes, there’s a clear governance incentive to menu design that plan sponsors sometimes overlook. A streamlined, well-documented lineup is easier to monitor, easier to explain, and a more effective defense.

When a committee can articulate why each fund is on the menu, what role it plays, how it fits the structure, and what criteria would trigger its removal, the committee is demonstrating procedural prudence. That’s a plan that can withstand a Department of Labor audit or a participant complaint without scrambling to reconstruct the reasoning.

Contrast that with a plan that has grown organically over years of incremental additions. Stating “It was a good idea at the time” just isn’t going to persuade an auditor. A fund added because a committee member liked its recent performance, another added to appease a vendor, a third retained out of inertia, are not components of a well-designed plan and procedure. 

That kind of menu is hard to justify and harder to manage. The documentation doesn’t reflect intentional design because there wasn’t any.

A defined Investment Policy Statement (IPS) that specifies the purpose and criteria for each tier gives committees a governance framework that holds up over time, not just during the next quarterly review.

How Many Funds Is Too Many?

There’s no universal right answer, but the federal Thrift Savings Plan (one of the largest defined contribution plans in the country) offers a useful reference point on the low end. It operates with a small number of broad index funds and a lifecycle fund series. Participation is high, internal investments costs are low and the choices are limited but effective.

For most institutional plans, a menu of 15 to 20 options (tops) is generally sufficient to meet the needs of a diverse workforce. Beyond that, additional funds tend to create complexity without adding meaningful diversification. The marginal participant benefit is low, the governance burden is not. Think of a restaurant menu; the more entree choices, the longer it takes a dining customer to decide what to order.

One area that deserves more attention is fixed income (bonds). Many plans emphasize equity diversification while leaving the fixed income side underdeveloped. Often, we see one broad-based bond market index fund and perhaps one other fund or nothing else. 

Participants who are closer to retirement or simply more conservative in their investing approach need adequate fixed income options to suit their own objectives. At minimum, a stable value or money market fund, an intermediate-term bond fund, and an international bond option along with a total bond market fund would cover most situations.

Starting the Redesign Conversation

For committees that want to revisit their menu structure, the first step is to separate the structural question from the fund-selection question. Before asking which funds to include, ask what the menu is supposed to do, who it’s serving, what decisions it needs to support, and how clearly it communicates those options to someone without a financial background.

From there, the conversation shifts to whether the current menu answers those questions, and where it falls short. That’s a more productive review than debating whether a given fund outperformed its benchmark last year.

At PlanPILOT, we work with plan sponsors to evaluate not just fund performance but the overall architecture of the investment menu. The goal is a lineup that works for participants as they actually are (not as we wish they were), and that holds up to the scrutiny that comes with fiduciary responsibility.

Is Your Investment Menu Working for Your Participants?

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

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

To learn more about how we can help with fiduciary oversight and improving 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

When it comes to selecting the investments for the retirement plan, many plan sponsors and/or the benefits committee focus far too heavily on selecting “the best funds.” In reality, there is far more to an effective lineup than whether this fund or that has a “five star” or “five moon” rating.

In fact, the structure, not the ratings, of the investment lineup has a far greater impact on participant outcomes as well as fiduciary risk. A well-structured line-up can help improve decision-making, reduce participant confusion (and thereafter reluctance to enroll), as well as strengthen fiduciary defensibility—even if the underlying fund selections are simplified and perhaps similar in some ways to each other.

At PlanPILOT, one of our core strengths as a retirement plan consultant is our ability to look “under the hood” of participant plans and work with our clients to not only improve what is measurable, but also what is ultimately meaningful in achieving excellence with a benefits program. Let’s look at the issue of investment selection in a retirement plan and how to strengthen the structure of the lineup and to maximize results.

Framing the Problem

For many plan committees, the semi-annual or quarterly investment review is a hunt for the “best funds.” Hours are spent scrutinizing performance spreadsheets, chasing top-quartile performers, and replacing funds that underperformed their benchmark last year.

Plan sponsors often feel immense pressure to pick “winners,” yet the investment industry is cyclical; today’s top-performing fund is often tomorrow’s median or underperforming fund, a concept known as “reversion to the mean.” Selecting funds based on recent performance, or who’s the “hot manager,” is not a good foundation to promote participant success in saving and investing for their future.

The problem, therefore, lies not in whether good investments are selected, but in the question asked. Instead of: “Are we offering the best funds?” the question and objective ought to be:

“Is our investment lineup designed for how participants actually make decisions?”

How those decisions will be made can result in better outcomes, both in encouraging participation in the plan and in participants having the confidence to contribute in order to reach their own retirement goals. In other words, how the plan and its investment menu is designed and structured will ultimately shape the behavior of the participants. This is an often overlooked concept in plan design.

Where Plan Sponsors Go Wrong

Here are areas where plan sponsors and the committees often go astray:

• Overloaded menus: When committees focus on offering many “great” funds, they often create a menu with too many options. Studies have shown that employees overwhelmed by too many choices often freeze, fail to enroll, or default to improper allocations.
• Lack of clear hierarchy or tiers: A lack of a clear hierarchy or tiered structure (core vs. supplemental vs. specialized) in investment menus is a significant problem that causes employee confusion, “analysis paralysis,” and potentially lower investment returns for the participant. 

Without tiers, participants may struggle to identify foundational funds (like core funds or target-date funds) versus specialized options, leading them to either avoid the plan entirely or build sub-optimal portfolios 

• Misalignment between:

• • • QDIA (The default target retirement date fund)

• Core menu (The core index funds of U.S. equity, international and bonds)

• • • Supplemental/active funds (For further diversification or outperformance)
    • Brokerage window (If offered, for other investments not in the core menu)
  • Treating lineup changes as incremental fund swaps, rather than strategic redesign: This is the result of continually trying to find “a better fund.”

• Failure to revisit structure as plan demographics evolve: As your workforce changes, so must your plan design. Older workers may require different plan features than a younger, more tech-savvy participant base.

Why Structure Matters

The investment menu structure( the framework that dictates which asset classes are available and how they are presented) has a more direct impact on participant outcomes.

1. Participant Behavior

• Participants don’t optimize, they simplify: it’s nearly a certain human trait to avoid making a mistake.
• Poor structure leads to:
  • Decision paralysis
  • Over-diversification or concentration
• A thoughtful structure nudges better outcomes without requiring expertise.

2. Fiduciary Oversight

• A coherent structure demonstrates the plan sponsor’s procedural prudence.
• Easier to justify decisions in:
  • Committee documentation
  • DOL audits
• Shows intentional design vs. ad hoc fund accumulation

3. Governance Efficiency

• Streamlined lineup = more effective monitoring
• Reduces noise in:
  • Investment reviews
  • Watchlist decisions
• Allows committees to focus on material issues that occur from time to time

Best-Practice Framework

To build a robust lineup, focus on a “less is more” strategy and a tiered approach, as follows:

• Start with a default QDIA choice: This would be the target-retirement-year (TDF) selections that closely match the participant’s anticipated year of retirement. Such investments automatically rebalance the risk allocation on a time-horizon basis and are considered appropriate for those wishing an all-in-one approach to their retirement investments. 
• Implement a core-and-satellite approach: Implement a strong core (TDFs or index funds) that covers major asset classes. Add “satellite” funds only if they serve a specific, necessary role.
• Simplify the diversification approach: As an example, the federal Thrift Savings Plan (TSP) uses a limited number of high-quality, broad-index funds. This approach is simple, low-cost, and effective.
• Use a defined Investment Policy Statement (IPS): Your committee should adopt an IPS that focuses on the process of monitoring, not just selecting. This ensures that when a fund is removed, it’s due to a failure to meet predefined, qualitative criteria, rather than a subjective emotional reaction to performance.
• Limit options to reduce participant overwhelm: A strong menu rarely needs more than 15-20 options. Reducing excessive choices often improves employee participation and satisfaction.
• Include proper fixed-income options: Confirm the menu offers enough variety for risk-averse employees, such as a stable value or money market fund, an intermediate-term bond fund, and an international bond fund. A frequent complaint among participants is the emphasis on diversifying the equity (stock) menu but the fixed income menu is limited to 2-3 choices.

Build the House First, Then Add the Pictures

For plan sponsors, the duty of prudence is best served by creating a retirement plan structure that helps employees make good decisions. By focusing on a well-designed, simplified investment menu rather than hunting for “hot” funds, committees can better meet their fiduciary obligations, reduce costs, and, ultimately, improve the retirement stability of their employees.

How Do You Reach Excellence in Your Retirement Plan? Talk With Us.

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

Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.

To learn more about how we can help with fiduciary oversight and improving 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.