How Good Is Your 401(k) Plan?

Over the years, as a financial advisor I’ve seen some company 401(k) plans that have been absolutely great while I’ve seen others that have been mediocre at best. The common thread between all these plans is very few of the participants had an idea how good their plan was. In a few cases I even wonder if the company knew how good their 401(k) program was. Now there is a tool that can help. is an online tool that provides a quantitative rating of company 401(k) plans. Plan components to calculate the rating include the Total Plan Cost, Company Generosity, Investment Menu Quality, Participation Rate, Salary Deferrals and Account Balances with individual grades for each. From there, a rating of 0-100 is produced based on these factors, from there the rating of the company’s 401(k) plan is compared to the lowest rating in their peer group, average rating in the peer group and the highest in the peer group.

How can this help? For the participant, it may provide some guidance on if you should be fully funding your 401(k) plan or if you should be complementing your 401(k) with outside accounts such as a Roth, a Traditional IRA or a taxable brokerage account (the best depending on your individual situation of course). If your company is open to employee input, it may be a great tool to share with managers who are in charge of employee benefits to help improve their plan. For the employer who wants to provide excellent benefits to retain valued employees, this may be a great tool to help them improve the weaknesses in their current 401(k) plan.

In the past, 401(k) quality has been a bit of a “black box.” is a tool that appears to be turning this around.

About the author

Jeffrey N. Bogue, CFP®

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