Many small and midsize business owners focus on daily operational challenges—hiring, cash flow, and competition—leaving retirement benefits as a lower priority. Yet recent data shows that only 37% of workers feel confident about reaching a comfortable retirement, and inadequate plan design can worsen that outlook.
Review Record‑Keeper Contracts Regularly
By the end of 2024, five firms controlled roughly 70% of defined‑contribution assets in the United States. This concentration has driven technology upgrades and pricing efficiencies, but it also means many employers remain with the same record‑keeper for eight years or more, well beyond the industry best practice of a comprehensive review every three to five years. Benchmarking fees and services can often reveal opportunities to lower administrative costs while enhancing participant tools and education.
Consider Pooled Employer Plans (PEPs)
PEPs allow unrelated employers to join a single, professionally managed 401(k) plan while retaining control over key design features such as eligibility, matching formulas, and vesting schedules. The primary benefit is scale: participating employers report a 50%‑75% reduction in internal time spent on fiduciary and compliance tasks, and average per‑participant fees drop about 4% thanks to consolidated administration and institutional pricing. Assets in PEPs now exceed $17 billion, covering more than one million employees, making them a viable option for many small and mid‑market firms.
Utilize Lower‑Cost Investment Vehicles
Institutional investment strategies, including collective investment trusts (CITs), are available exclusively within ERISA‑qualified retirement plans. CITs operate like mutual funds but avoid many marketing and distribution expenses, resulting in lower expense ratios. By the end of 2025, CITs had become the dominant vehicle for target‑date strategies, offering participants better net compounding over time.
Why These Changes Matter
Bernstein Private Wealth Management research indicates that a sustained one‑percentage‑point improvement in annualized returns can add nearly 25% to a participant’s retirement savings over a full career—equivalent to an extra decade of retirement spending power. Importantly, these gains do not require higher employer contributions or increased investment risk; they stem from disciplined cost management, professional plan administration, and access to lower‑cost investment options.
Employers interested in evaluating their plans should start with a benchmarking analysis that compares fees, governance structures, vendor relationships, and investment options against similar plans in today’s market. Such an analysis can identify modest adjustments that improve outcomes for employees without adding complexity or cost.
While participation in a PEP or switching to CITs may not suit every organization, the growing adoption among small and midsize firms suggests that many are finding these tools valuable for meeting fiduciary responsibilities and enhancing retirement readiness for their workforce.
Original reporting: El Paso News (HLL/CB) — read the source article.
