Measuring Retirement Plan Success: Beyond Participation Rates
For many employers, offering a retirement plan is a fundamental part of their benefits package. It helps attract and retain talent while encouraging employees to save for their future. But simply providing a plan isn’t enough—employers and fiduciaries must also assess whether their plan is truly helping employees achieve retirement security.
A common measure of success is participation rates—the percentage of employees actively contributing to the plan. High enrollment numbers can indicate that the plan is accessible and that employees recognize its value. But are employees saving enough? Will they have the income they need to maintain their standard of living in retirement?
Fred Barstein, CEO and founder of TPSU, interviews Chris, the CFO of an infrastructure design consulting firm in Jacksonville, Florida, following a TPSU program at the University of North Florida. Chris’s firm has approximately 375 employees, and he plays a key role in overseeing their retirement plan.
During the discussion, Chris poses an essential question: How do you know if you have a good retirement plan? He explains that as a fiduciary, it’s his responsibility to ensure the company’s retirement plan is optimized for employees’ benefit. One of the key indicators he looks at is employee engagement—if employees are actively participating in the plan, it suggests they recognize its value. However, he acknowledges that high participation alone doesn’t necessarily mean employees are on track for retirement.
Fred builds on this point, noting that a more concrete measure is the income replacement ratio—the percentage of pre-retirement income an employee can expect to replace in retirement. The ideal benchmark is typically 48–50%, but Chris notes that this number can be difficult to determine. Many employees join the plan later in life, often in their 40s or 50s, or have additional retirement accounts from previous employers. Without a full picture of each employee’s financial situation, it’s challenging to gauge their true retirement readiness.
Read the Full Transcript Here:
Fred Barstein:
Greetings. This is Fred Barstein, CEO and founder of TPSU. Just completed a program at the University of North Florida. I’m here with Chris. Welcome, Chris.
Chris:
Thank you, Fred.
Fred Barstein:
Okay, if we ask you a few questions?
Chris:
Sure. Fire away.
Fred Barstein:
And before we start, tell us your name, the role of your company, and how many employees you have.
Chris:
So I’m Chris. I’m the CFO of an infrastructure design consulting firm here in Jacksonville, Florida. We’ve got about 375 employees.
Fred Barstein:
Very good. So Chris, you asked, I thought, what was a real pertinent question, actually, the crux of why we have retirement plans. Could you repeat that question for our audience?
Chris:
Yeah. One of your speakers mentioned, how do you know you have a good plan? And so we as plan administrators have a fiduciary responsibility to make sure we’re providing a plan that is good, that’s optimized to the benefit of the employee. And so how do you know? What’s the metric for that?
Fred Barstein:
Right.
Chris:
And so what I look at is I say, “What’s our employee engagement?”
Fred Barstein:
Right.
Chris:
Because a person is going to act in their own best interest, and so if you have high employee engagement, that’s one metric.
Fred Barstein:
Right.
Chris:
And we do at our company, have very high engagement, but he made the point of are they on their way to retirement?
Fred Barstein:
Right.
Chris:
Are they going to be able to retire? And so that’s a tougher number to get to.
Fred Barstein:
Right. And that was ultimately what’s their retirement or income replacement ratio?
Chris:
That’s right. Yeah.
Fred Barstein:
Which we think is 48 to 50%. But then you ask another question and say, “Okay, assuming that we want to judge on 40 to 50% income replacement,” what was the other question, the follow-up?
Chris:
Well, yeah, so income replacement is difficult because now you have people that are coming into your plan in their mid-forties or fifties, they have spouses that are working. It requires data from your participants-
Fred Barstein:
Right.
Chris:
…into the system to be able to really tell where they are in terms of their retirement readiness.
Fred Barstein:
And one of the things we heard was not working is how do you get all of their plans? They might have plans from previous employers.
Chris:
That’s right.
Fred Barstein:
And put it, because that tells the story as well. Now they were really, really hard, but very good questions. So thank you for that.
Chris:
Yeah.
Fred Barstein:
Final question. Things you learned or would you recommend TPSU?
Chris:
Absolutely would recommend TPSU. This has been a very valuable session today. There’s a lot of information about SECURE Act 2.0. The Pooled Employer Plans is something that we really didn’t know anything about, and so the way that addresses liability, the way that addresses administrative costs, things like that, that’s very attractive.
Fred Barstein:
Very good.
Chris:
Yeah.
Fred Barstein:
Well, thank you for your time, Chris, and thank you for watching 401kTV. Please stay tuned.
