In another indication of how mainstream and important 401(k) plans have become, Bloomberg has jumped into the market, ranking the plans of the 250 largest companies. Using 2012 DOL data, reporters used various criteria to review what’s offered to new employees — including match, investments, vesting and auto-enrollment. Biotech and energy companies ranked at the top, while retail companies were at the bottom. Big surprise.
Brightscope made a big splash nearly five years ago by coming out with their own rating system which was used primarily by advisors to prospect, raising questions about the validity of the criteria and data. Fiduciary Benchmark uses a more scientific approach, using data supplied by record keepers, but it does not publish a list. Bloomberg’s entry further validates the move to benchmark 401(k) plans and, rather than hurting Brightscope or FBi, might cause more plan sponsors to pay attention.
But the move by Bloomberg raises a fundamental question: Should plans be judged on what they offer or on participant outcomes?
There’s no question that the better the features that are offered — including a generous match and strong investments — the better the outcomes. But it all depends on why a company chooses to offer a 401(k) plan. Is it to attract the best employees or to lower overall expenses by making sure that older workers retire “on time”?
Regardless of the answer, Bloomberg’s entry into the 401(k) market could be good for us all since it will make more companies think about the features and overall quality of the plans they offer. If you offer a plan, why not make it a good one?
