How to evaluate retirement plans

Financial advisors who work with plan sponsors are a critical source of knowledge and a valuable resource for plan sponsors and participants. They help retirement plan sponsors and business owners navigate the complexities of plan administration with regular and thorough plan reviews that identify areas for improvement and help maximize the benefits of a plan. It’s an important role that includes assessing plan performance, monitoring investment options and helping plan sponsors meet continuously evolving regulatory requirements.

2025 compliance calendar

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The value and goals of retirement plan reviews

The goal of an annual review is to maximize the plan’s value while keeping it compliant, competitive and aligned with financial and organizational objectives. Regular retirement plan reviews also look at the plan’s fiduciaries and whether they’re delivering on their obligations.

About fiduciary duties

Acting as a fiduciary and evaluating other plan fiduciaries is why many retirement plans work with a financial advisor. They’re obligated to abide by the fiduciary responsibilities set forth in the Employee Retirement Income Security Act (ERISA), pertaining to individuals or entities that:

• Provide investment advice to the plan (financial advisor)
• Have discretionary authority or responsibility for plan administration (employer, plan sponsor)
• Are formally designated as a "named fiduciary" by the plan

Financial advisors have the primary responsibility of acting in the best interests of the plan's participants and beneficiaries. They act prudently to diversify the plan's investments to minimize risk, follow the terms of plan documents and avoid conflicts of interest.

Financial advisors also help business owners, especially small employers, understand their role as a fiduciary. They can help them recognize the importance of regular plan reviews and how to stay informed about plan features, fees and performance, as well as making sure that all plan administrators and third-party administrators are providing agreed-upon services.

Fiduciaries and their roles are typically recorded in these plan documents:

• Investment policy statement
• Education policy statement
• Retirement plan charter
• Plan documents and annual filings
• Service agreements

Fiduciary Quick Tips:

1. Create a plan committee
2. Establish proper procedures
3. Comply with ERISA Section 404(c)
4. Create an Investment Policy Statement (IPS)
5. Consider offering a Qualified Default Investment Alternative
6. Monitor the plan’s investments and service providers
7. Document your decisions and actions

Annual plan reviews

Retirement plan fiduciaries meet at least annually to discuss the plan with their financial advisor, other outside service providers, custodian/trustee and third-party administrators. Financial advisors prepare for a plan review by gathering the following documentation:

• Original plan documents
• Copy of the original service agreement and date established
• Investment options and dates that were made available
• Plan goals
• Investment policy statement
• A summary of employee and participant demographics and risk tolerance
• Changes the plan made over the last year
• Investment performance and fees
• Form 5500 filings

Key elements of annual plan reviews

Financial advisors cover the following important elements in a plan review:

1. Fiduciary responsibilities and plan documentation

• The plan’s current fidelity bond*
• Plan documentation
• Employee eligibility
• Timely depositing of participant and employer contributions
• Compliance testing and reporting requirements
• Vesting schedules
• Participant education and resources
• Fiduciaries avoiding self-dealing and conflicts of interests

* Most fiduciaries in the U.S. need to be bonded under ERISA because they typically handle plan funds or property. A fidelity bond protects the plan from losses due to fraud or dishonesty.

2. Fee disclosures from service providers, custodian/trustees, investment fees and third-party administrators

Financial advisors help plan sponsors make sure the plan serves the best interests of employees by remaining competitive, cost-effective and compliant. They evaluate direct and indirect fees annually to determine whether they’re reasonable compared to the services provided.

3. Regulatory compliance

Financial advisor guidance is critical to prevent compliance issues. Thorough plan reviews help plans stay in compliance with IRS annual nondiscrimination testing. Standard nondiscrimination tests must be performed and passed annually to make sure all employees are eligible to participate in the plan regardless of their level of compensation. The tests determine that highly compensated employees are not unfairly benefiting at the expense of non-highly compensated employees. Failing nondiscrimination tests comes with significant penalties and heavy administrative burdens for employers.

4. Plan performance

Plan administrators must determine if funds in the plan meet the criteria outlined in the investment policy statement. Financial advisors help identify ways to improve overall plan performance by evaluating investment options, adjusting contribution structures or incorporating investing tools and resources to help participants make more informed decisions. Making retirement planning easier to understand helps boost participation and increase the overall success of a plan.

5. Participant goal alignment

Regular plan reviews conducted by financial advisors assess whether the plan is aligning to participant retirement goals. For example, are employees taking full advantage of employer matches? Are the available investment options meeting diverse risk profiles? Are vesting schedules motivating participation or can they be improved?

Financial advisors work with plan participants to gauge participant comfort levels with market volatility and potential loss with risk tolerance questionnaires and assessments. They collect quantitative data that helps identify patterns or trends among participants. They also use qualitative insights, including participants’ life stages, financial goals and investment knowledge. Then, they align the plan’s investment portfolio based on the data to offer suitable investment options. Risk tolerance is periodically reviewed to assess whether changes are needed.

6. Plan modifications

Retirement plans must evolve to keep pace with changes in regulations, business needs and participant demographics. During a review, financial advisors evaluate whether the plan needs modifications or amendments. For example, the SECURE 2.0 Act introduced several changes, including automatic enrollment requirements and enhanced eligibility for part-time employees.

7. Compensation definitions and distribution options

Financial advisors make sure the plan’s compensation definitions and distribution options are up to date for compliance and participant satisfaction. This includes reviewing vesting schedules, employer match formulas and distribution of funds options such as lump-sum payments or annuities. Advisors review the options to make sure they meet regulatory standards and align with participant preferences.

Continuous improvement strategies for retirement plan evaluation

Retirement plan evaluation is an area where financial advisors help companies make continuous progress by providing invaluable guidance and exceptional service. They help retirement plans with the following:

• Revisit plan goals regularly: Financial advisors help plan sponsors review the goals of the retirement plan regularly, at least annually. They look at whether current goals are still relevant to the company’s business objectives and participant retirement needs, and determine whether the company’s workforce changed in a way that requires adjustments to the plan. Financial advisors also help plan sponsors revisit goals periodically to help align business and participant expectations.
• Assess participant satisfaction: Participant satisfaction is a key indicator of a retirement plan’s success. Surveys, feedback and participation metrics provide valuable insight into how well the plan meets employee needs.
• Stay informed about industry best practices: Financial advisors help plan sponsors stay up to date on the latest industry trends and best practices to keep their plan competitive. This includes staying informed about new and updated regulations, as well as innovations in plan design, investment strategies and participant engagement tools.

ADP provider of choice

When financial advisors work with ADP Retirement Services, we help them deepen relationships by delivering more value to their clients. Advisors who become a provider of choice qualify for enhanced support and exclusive services through the ADP Advisor Elite program.

Advisors and their clients are supported by a team of tenured associates with a deep understanding of ERISA, compliance and employee education strategies that help plan sponsors stay ahead of administration responsibilities while inspiring participants to build financial security.

Support and resources designed for ease of use

Advisor and plan resources

ADP resources help financial advisors provide exceptional service to retirement plan clients with the following:

• A financial advisor portal, Advisor Access, provides fast access to valuable data and information with a holistic view of retirement plans. It includes plan and compliance data and a thorough view of investments and fund performance.
• Plan Sponsor Website for clients and their financial advisor that provides plan insights, analytics and status of annual compliance tests. Clients can quickly resolve employee data issues, fund employer contributions and file Form 5500.

ADP payroll and retirement plan clients also benefit from SMARTSync®, our real-time payroll integration solution. It links ADP payroll and retirement plan recordkeeping systems so they can continuously share critical plan data while sophisticated programming checks for accuracy, identifies errors and manages processes. It helps clients save time on manual plan tasks while managing fiduciary plan risk.

Investment choice and flexibility

Our investment objectivity and open fund architecture¹ (OFA) give financial advisors and their clients the ability to maintain investment continuity and design a best-fit fund lineup selected from an expansive universe of options. With over 13,000 investment options from more than 160 leading investment managers, ADP offers flexible and unbiased investment platforms with no proprietary fund requirements.

Retirement plan assessment tools

ADP helps make retirement plan assessments more efficient and effective. Financial advisors who work with ADP conduct thorough reviews, mitigate risks and improve plan performance with tools that include:

• Compliance dashboards: Our compliance dashboards provide real-time insights into a plan’s compliance status. Advisors can easily access results for non-discrimination tests and review employee data to identify any issues that could affect compliance.
• Fiduciary services: Investment monitoring, fee assessments and risk mitigation strategies help advisors and plan sponsors determine whether the plan is being managed with the best interests of participants in mind.
• Data analytics and reporting tools: ADP technology integrates seamlessly with payroll and benefits systems, allowing advisors to analyze key plan metrics, such as participation rates, deferral percentages and overall plan performance. These insights help advisors identify areas for improvement and help the plan stay aligned with business goals and participant needs.

Effortlessly manage ADP retirement plans all in one place

Regular retirement plan evaluations are essential for the long-term health and success of the plan. Financial advisors and plan sponsors work with ADP for thorough, effective and insightful plan review services.

For professional use only.

¹ In assembling and presenting its investment platforms, ADP, Inc. is not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity.

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ADP Inc. owns and operates the ADP.com website. Unless otherwise disclosed or agreed to in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products. Please consult with your own advisors for such advice. Investment options are available through the applicable entity(ies) for each retirement product. Investment options in the “ADP Direct Products” are available through either ADP Broker-Dealer, Inc. (ADP BD), Member FINRA, an affiliate of ADP, Inc., One ADP Blvd, Roseland, NJ 07068 or (in the case of certain investments) ADP, Inc. Only registered representatives of ADP BD may offer and sell ADP retirement products and services or speak to retirement plan features and/or investment options available in any ADP retirement products.