How Successful is Your Retirement Plan? Ask This Simple Question
There are many ways to measure the success of a retirement plan - from simple methods such as assessing plan asset growth, average account balance, and voluntary participation percentage metrics, to more complicated approaches like monitoring the percentage of participants on track to accumulate enough to successfully retire.
However, there is one question that many plan sponsors fail to ask of their recordkeeper that may be one of the most telling gauges of retirement plan success: “How many retirement plan participants have never logged into their online retirement plan account?”
In many plans, that number is shockingly high, either because plan sponsors fail to pay attention to it and/or recordkeepers/TPAs fail to improve it. Let’s take a look at the detrimental effects of participants not accessing online accounts:
- For most participants, not logging in is their way of saying, “I don’t care” — While there are some participants - particularly retirees - who engage in their plans in a more low-tech way (e.g., meeting in-person with an advisor), most have logged in at least once. In general, those who have never logged in either do not care about the benefit or do not realize the benefit exists (the latter being more of an issue with terminated employees). Having participants who believe either, or both, is a sign of poor participant engagement, likely meaning that the return on the employer’s investment in a retirement plan benefit is not paying off as well as it should be.
- Inactive online accounts make the plan more vulnerable to cybersecurity and traditional fraud risks — Criminals like to attack inactive accounts because their activities are more likely to go undetected. Think about it: if you check your bank account every day and fraud occurs, the issue is likely to be quickly resolved, as opposed to those who never, or rarely, check their bank account. Most articles on the subject advise retirement plan participants to check their accounts frequently (monthly at a minimum) to change their login credentials, at least.
- Online access is a leading indicator for other success statistics — If participants aren’t logging in, and the only way to increase or initiate a salary deferral election is online, then it is likely that voluntary participation and deferral percentages are suffering. These participants are also unlikely to be taking other valuable steps to improve their retirement outcomes, since many of those are initiated online.
- Inactive online accounts mean the plan is probably wasting money on paper transactions — If a participant has never logged in, chances are they have not opted to electronically receive the myriad of documents that plan sponsors are required to send. And, to complete some transactions, these participants might even be using old-fashioned paper forms. This paper adds up to increased recordkeeping and administrative expenses for the plan.
It’s easy to see why asking your recordkeeper about online account access is important! In fact, it is so important that retirement plan recordkeepers have been known to ask it of their own employees in their own retirement plans, and to work to improve this metric if they don’t like the answer. These recordkeepers should be working to improve the statistic in your plan as well.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
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