The One Metric Most Retirement Plan Sponsors Are Missing

Most retirement plan committees can tell you exactly what they’re paying in fees. Far fewer can tell you whether their employees are actually on track to retire.

That disconnect may represent the single biggest governance gap in retirement plans today.

For years, fiduciaries have been taught to focus on investment performance, fees, compliance testing, Form 5500 filings, and service provider oversight. Those responsibilities matter. They’re all important components of prudent fiduciary governance. But they’re not the reason retirement plans exist.

The purpose of a retirement plan is to help participants achieve retirement readiness. Yet many committees spend little time measuring whether that’s actually happening. They know their average investment expense ratio. They know when the last benchmark study was completed. They know whether the plan passed compliance testing.  

But ask questions like these and the answers often become less clear:

• Are employees saving enough?
• How do participation rates compare to similar organizations?
• Are deferral rates improving or declining?
• Are participants increasing contributions over time?
• How many employees are taking loans or hardship withdrawals?
• What percentage of participants are on track for retirement?

These are participant outcome metrics, and they may be the most important indicators of plan success. Unfortunately, they’re also among the least discussed topics in committee meetings.

Instead, many fiduciaries become focused on process metrics. They spend their time proving the plan is being administered correctly without asking whether the plan is producing the results it was created to deliver. In effect, they measure activity rather than outcomes.

That’s a problem because ERISA’s purpose isn’t simply to create compliant retirement plans. It’s to protect participants and beneficiaries. A prudent process remains essential, but the process itself is not the destination. It’s the means to an end.

The Single Most Important Metric to Benchmark

And that end is helping employees prepare for retirement.  Participants don’t retire on committee minutes. They retire on savings.

That’s why retirement plan committees should be reviewing participant outcome metrics with the same rigor they apply to fees, investments, and service providers. They should establish targets, benchmark results against peer organizations, and regularly evaluate whether plan design, education, and participant engagement efforts are moving the needle.

In other words, governance should be measured not only by what the committee does, but by what participants experience.

Learn How at Our Upcoming Live Training

This idea has been a recurring theme throughout our recent podcast series, The LoVasco Briefing. In Episode 1 and Episode 2, we discussed the governance framework that supports prudent fiduciary oversight. In Episode 3, we explored the role of benchmarking. And in Episode 4, we examined why checking compliance boxes alone may not be enough.

The common thread is simple: good governance isn’t just about managing a plan. It’s about improving outcomes for the people the plan was created to serve.

That’s one of the core topics we’ll explore during The Governance Gap, our live fiduciary governance training for plan sponsors, committee members, HR leaders, executives, and named fiduciaries.

Because the most important question may not be whether your plan is compliant. It may be whether it’s working. And if you don’t know the answer, that may be the most important metric of all.