3. AGENDA
Industry trends
The need for benchmarking
Review of the traditional plan health metrics
The new (and improved) way to report on plan health
A call to action
Securities offered through LPL Financial, Member FINRA/SIPC.
4. INDUSTRY TRENDS
Participant Readiness: Current State
According to the Employee Benefits Research Institute’s (EBRI) retirement readiness
ratings in 2010, the percentage of participants “at risk” of having insufficient income:*
Generation X
ages 36-45
44.5%
*For basic retirement expenses and uninsured health costs.
Securities offered through LPL Financial, Member FINRA/SIPC.
Late Boomers
ages 46-55
43.7%
Early Boomers
ages 56-62
47.2%
5. THE NEED FOR BENCHMARKING
Plan Participation Benchmarking
A critical measure of a successful retirement plan is a healthy
participation rate. It is important to understand what drives
participant behavior, helping you increase both participation rates
and increased contribution to the plan.
Key metrics include:
– The participation rate in your plan among eligible employees
– The percentage of active participants deferring enough of their salary
to take full advantage of the employer match offered
– The average number of investment options held by plan participants
Securities offered through LPL Financial, Member FINRA/SIPC.
6. THE NEED FOR BENCHMARKING
Plan Design Benchmarking
It is important to keep up with new features to ensure your plan
stays competitive, and addresses the needs of your participants.
Comparing your plan’s features with the industry benchmark
averages provides a basis for comparison.
Key metrics include:
– Do you provide a match?
– If yes, how does the match your company provides compare to industry
benchmarks?
– Are you using automatic-enrollment?
– Have you established a Qualified Default Investment Alternative (QDIA)?
– How many investment options are available to your participants in the plan?
Securities offered through LPL Financial, Member FINRA/SIPC.
7. THE NEED FOR BENCHMARKING
Plan Review Benchmarking
It is imperative for plan sponsors to implement a well-documented
process for reviewing plan features. Plan sponsors are ultimately
responsible for the oversight of the plan.
Partnering with a financial advisor who understands the
retirement plan space can help you stay on course.
Key metrics include:
– How often you review the investment options available in the plan
– How often you review the plan’s total costs and fees
– How often you evaluate your plan’s current service providers
– Implementation/review of an investment committee for your plan
– Design/implement/review an Investment Policy Statement (IPS)
– Utilizing the services of a financial advisor
Securities offered through LPL Financial, Member FINRA/SIPC.
8. BY THE NUMBERS
30%
Participation Rate
24%
Not Maximizing Employer
Match
25%
Do Not Offer Employer Match
70%
Do Not Use Auto Enrollment
21
Investment Options
The average rate of eligible employees NOT participating in a
defined contribution plan being offered by their employer
Over half the plans surveyed reported that nearly 24% of
active participants DO NOT defer enough salary to take full
advantage of the employer match offered
25% of plans DO NOT offer either an employer match or non-elective
Source: PLANSPONSOR Defined Contribution Survey, 2010.
Securities offered through LPL Financial, Member FINRA/SIPC.
contribution
Nearly 70% of plans DO NOT automatically enroll eligible
employees into the plan
Across all industries, plans offer an average of 21
investment options
9. ON AN ANNUAL BASIS
Across all industries
Source: PLANSPONSOR Defined Contribution Survey, 2010.
Securities offered through LPL Financial, Member FINRA/SIPC.
11. WHAT’S IMPORTANT?
The #1 goal is a dignified retirement for every participant
One key to retirement dignity is having enough money
Replacement ratio is the benchmark we use to determine
likelihood of a dignified retirement
Participation rate, account balance and investment performance
data points give us insight into desirable plan design attributes
Plan fees help determine if investment performance is likely to
deliver sufficient results to arrive at a dignified retirement
Securities offered through LPL Financial, Member FINRA/SIPC.
12. NEW EVALUATION TECHNIQUES
Funding Metrics Investment Metrics Participant Metrics
From:
Focusing on average
deferral rates and
account balances
To:
Securities offered through LPL Financial, Member FINRA/SIPC.
From:
Focusing on the number
of employees
participating in the plan
From:
Focusing on the number
of participants that are
invested in a particular
investment option
Focusing on the average
income replacement
ratio
To:
Focusing on the number
of participants that are
on track to meet their
retirement goals based
on income replacement
benchmarks
To:
Focusing on whether
participants are properly
diversified to pursue
income replacement
targets and tolerance
for risk
13. A CALL TO ACTION
The Retirement Plan Health Check Report
It is essential that an accurate measurement of a plan’s
value exists
This comprehensive and sophisticated program will provide
qualitative plan statistics in a simple, straightforward format
The Retirement Plan Health Check report allows advisors to
report on the "Health" of a plan by presenting key plan attributes
compared to a valid peer group
Securities offered through LPL Financial, Member FINRA/SIPC.
14. THE RETIREMENT PLAN HEALTH CHECK
Securities offered through LPL Financial, Member FINRA/SIPC.
Historic and age group based plan participation,
deferral rates and average account balances
Highly and non-highly compensated employee statistics
Age group segmented and total participant
contribution levels
Current and historic portfolio diversification data
shown in total and divided by age groups
Aggregate plan performance
Plan fees
Ability to save historical results regardless of
plan provider
15. Securities offered through LPL Financial, Member FINRA/SIPC.
THANK YOU!
Ed Gimenez, CFP®, AIF®, RPA
Direct: 240-403-2563
E-mail: ed@raffaretirement.com
