As you’re probably judged in part on the return on investment of your work, why should your plans investment monitoring be any different? While pension law says that you will be judged on your investment process, is it not prudent to include performance output as part of the process? The Nirvana is to have first quartile fees and first quartile performance. Excessive fees decrease performance. Are you paying too much or are your employees paying too much? Let’s start with understanding where your employees’ investment results stand.

Investment monitoring and performance

Examining where your performance stands requires getting third party information that compares your plan to the universe. We use a couple of comparison sources to see where your plan stands. If not us, I recommend that you work with a fiduciary provider that uses third-party research to compare your plan against.

The Center for Fiduciary Studies recommends establishing a plan benchmark. For example, you might choose a mixture that is based on 50% S &P 500 index and 50% Aggregate Bond Index.

If you are using a target date strategy for your qualified default investment alternative I recommend pick a benchmark that most closely represents the current asset allocation of your qualified default investment alternatives. Working with one of my private wealth clients on her retirement planning, we found that combining 80% S&P 500 and 20% bond index tracking investments had outperformed by a significant measure the recommended target date option for her age group. Of course, she opted out of the qualified default investment alternative.