Larger employer plans are frequently cited as having better matches, participation rates and access to lower-priced institutional funds — but a new scoring analysis claims that the smallest plans outperform the largest plans.
The analysis by Judy Diamond Associates notes that very small 401(k) plans, those with 10 or fewer participants, had an average plan score of 63.8 out of 100, based on the most recent form 5500 plan disclosure documents from the Department of Labor. In contrast, those 401(k) plans with 100 or more participants averaged plan scores of 52.3 over the same period.
The specifics of the scoring were not disclosed, but a press release notes that the scores were determined using an algorithm that considers “key measures” of a plan’s performance compared to other plans nationwide. Judy Diamond explains that higher plan scores can result from comparatively higher participation rates, increases in contributions, higher rates of return, or an absence of certain signs of distress.
What isn’t mentioned, of course, is that the smallest 401(k) plans are probably also very owner-centric in their design/benefits.
More information about the findings is available here.
