Since plan administrators and sponsors aren’t generally pension or group retirement specialists, they depend on information from consultants and record keepers to determine the choices they’re going to make within a group retirement plan.
They’re also inundated by outside information regarding what actions to take within the plan. All of this information can be overwhelming, so here are three main areas to measure a group retirement plan’s success.
1. Member experience
The member experience may be the most important ingredient in the recipe for a successful plan. The members are, after all, the end users of the plan. And the reason most employers have a plan is to attract and retain employees.
Are members getting what they want, in terms of returns and the service that’s provided?
Members are typically more satisfied with their group retirement plan when they have easy access to information. This may be in the form of a company portal that outlines the plan, webinars or online education.
If a plan sponsor is providing this access to information and education on a regular basis, they’re covering a large part of a successfully run group retirement plan.
When it comes to the governance of capital accumulation plans, Canada has different regulatory bodies for different provinces and jurisdictions, along with a federal governing body.
Regulation varies from province to province, but the key principles transcend all jurisdictions. These best practices are called CAP guidelines, and if a plan sponsor is following them, they’re already going a long way to ensuring they have a compliant group retirement plan.
The CAP guidelines were put in place in order to give plan sponsors an idea of the area of fiduciary responsibility they should be covering when offering a group retirement plan. Some of the items highlighted in the guidelines include, but aren’t limited to: governance documents, committee structure, committee meeting outlines, recording of meetings and education offerings.
Another important area of governance is the performance of the plan. Although it can fall under the governance banner, performance should be addressed on its own. Governance provides base levels of protection regarding the choice of investment, but as a plan sponsor, this shouldn’t be a hurdle.
While there’s an almost endless list of investment pools to offer in a group retirement plan menu, this doesn’t mean they’re all the best — or even close to the best — offering.
Many plan members and sponsors look at the gross return as the key area of concern. This is important, but it doesn’t tell the whole story.
Plan sponsors should ask questions including:
- How is the fund performing in the long term?
- Is the fund mandate within the parameters of the group retirement plan goals?
- What is the pricing (management fee)?
- How is the fund performing versus various comparable measures?
Measuring the success of a group retirement plan can seem overwhelming to plan sponsors. However, if these three main areas are covered, it’s more than likely the plan is being handled successfully.