New Benchmine Measure to Compare Investment Returns of Employer 401(k) Plans, provided by OnlyBoth, launched in late November a free, open-to-all website for comparing the performance of 55,000+ employer 401(k) plans, offering many novel analytic capabilities to users.

The federal data source (Department of Labor EBSA) reports many core measures of 401(k) plans, leaving it to users of the data to introduce derived measures that better enable broad performance comparison across plans of different sizes. This led to our incorporating total administrative expense ratio, defined as total administrative expenses (Line 2i(5)) divided by total assets (Line 1f), times 100. Note: all data sources referenced here are from Schedule H.

The Benchmine 401(k) engines needed a measure of plan-year investment returns that likewise enables fair comparison. The federal data reports on total income and net income during a plan year, but these include employer and participant contributions and rollovers, which tend to skew the returns on investment. Also, plans sometimes transfer investment assets out of, or into, the plan, which also complicates fair comparison.

After consulting 401(k) industry experts, we decided on a new measure yield on beginning-of-plan-year total assets (yield for short), defined as net earnings on investments (the sum of the 10 column (b) entries from section 2b minus investment advisory and management fees from Line 2i(3)) divided by total assets at the beginning of the plan year (Line 1f(a)), times 100. By itself, this doesn’t deal with the complications of mid-year asset transfers (section 2l), so we added a qualifying criterion that a plan’s asset transfers (incoming + outgoing) be less than 1% of its total assets at the beginning of the plan year. This prerequisite disqualifies about 5% of the 55,788 401(k) plans at Benchmine, which then get a value of N/A for their yield.

These three CY 2021 examples of employer 401(k) plans (names omitted here), from different total-assets brackets, stand out on their joint yield and administrative expenses:

  • Only PLAN (within the $10M-$50M bracket) has both such a high total administrative expense ratio (1.716%) and such a low yield (11.70%).
  • In California with its 209 ($250M-$1B) plans, only PLAN has both such a high yield (18.31%) and such a low total administrative expense ratio (0.002%).
  • PLAN has the highest total administrative expense ratio (0.360%) among the 196 ($100M-$250M) plans that have 1,000 to 4,999 total participants and have at least a 16.66% yield.

In conclusion, Benchmine is now equipped with good measures for both administrative expenses and investment returns, all in the service of enabling fair comparison, heightening performance transparency, helping to drive improvement, and empowering participant choices.

Raul Valdes-Perez

Infusing Performance Transparency into Employer 401(k) Plans

OnlyBoth is proud to infuse unprecedented performance transparency into the world of employer 401(k) plans, about 55,000 of them, in partnership with, by applying a unique AI-based technology for comparative analytics (e.g., benchmarking) to the latest, completed EBSA 5500 and Schedule H data. DCIIA is offering this service as a member benefit.

Visit this DCIIA page for an introductory video as well as a series of ten brief explainer videos that illustrate how you can discover answers to the following questions about 401(k) plans:

  1. Where does a plan stand out from related peer groups?
  2. How does a plan compare to a user-selected peer group?
  3. What’s best in class, i.e., the best achievement on a given measure by a similar plan?
  4. How does a plan score compare to all others in the same industry?
  5. How do up to 10 plans compare side-by-side?
  6. What are the overall top- or bottom-scoring plans?
  7. What are the ranked scores for a group of plans selected by industry or geography?
  8. What are the top benchmarking insights for a group of plans that I select?
  9. What are the top benchmarking insights that mention specific data attributes?
  10. What plans match the characteristics, measures, and/or geography that I select?