Is Your 401(k) Plan Good? Here’s How to Know for Sure

If you’re a business owner, HR professional, or retirement plan committee member, you’ve probably asked this question:

“Is our 401(k) plan actually good?”

Many plans look fine on the surface. They have investments. They have a match. Employees can log in.

But a good 401(k) plan does more than exist. It helps employees retire with confidence, and protects the company and fiduciaries along the way.

Here’s how to tell the difference:

1. Your Plan Fees Are Clear and Competitive

A good 401(k) plan has:

• Transparent pricing
• Benchmarking against similar-sized plans
• No hidden revenue sharing surprises
• A clear understanding of what the advisor, recordkeeper, and TPA are paid

Many employers don’t realize they are fiduciaries under ERISA. That means you are responsible for ensuring fees are reasonable — not just “what you’ve always paid.”

Ask yourself:

• Have we benchmarked fees in the last 2-3 years?
• Can we clearly explain all plan costs?
• Do employees understand what they’re paying?

If the answer is no, it may be time for a review.

2. The Investment Lineup Is Simple and Well-Designed

A strong plan doesn’t overwhelm employees with 40+ fund options with overlapping objectives.

Instead, it includes:

• Target-date funds for easy diversification
• Core index or actively managed funds across asset classes
• A clear investment policy statement (IPS)
• Ongoing monitoring and documentation

A good lineup makes it easier for employees to make smart decisions, even if they aren’t investment experts.

3. Participation and Savings Rates Are Strong

Here’s a simple benchmark to consider. Keep in mind, what looks “optimized” on paper may not always align with your workforce demographics or company goals.

• Participation rate above 80%? That’s generally a strong sign of engagement.
• Average deferral rate near or above 8–10%? That suggests meaningful savings progress.
• Auto-enrollment and auto-escalation in place? That’s a powerful structural advantage.

If participation is low, your plan may exist… but it may not be working.

Plan design drives behavior – and behavior drives savings.

Benchmarks are helpful. But the right targets should reflect your workforce, compensation structure, and long-term goals – not just industry averages.

A strong 401(k) plan isn’t built around generic standards. It’s built around what works best for your company and your employees.

That includes:

• Education tailored to your workforce
• Communication that fits how your employees engage
• Plan features aligned with your pay structure and culture
• Strategic decisions (not industry pressure)

The right design isn’t one-size-fits-all. It’s intentional.

4. Your Employees Understand the Plan

A plan isn’t strong if employees don’t use it, or don’t understand it. 

Ask yourself: How easy is it to understand?

Look for:

• Ongoing education, not just enrollment meetings
• Clear, simple communication
• Explanations of matches, vesting, and investments in plain language
• Access to one-on-one guidance when questions come up

If employees are consistently confused about how the match works, when they’re vested, or how to choose investments, it’s a sign the plan may need a review.

Clarity drives confidence. And confidence drives participation.

5. The Plan Design Supports Your Company Goals

Your 401(k) plan should align with your business objectives.

For example:

• Want to attract and retain talent? Consider a competitive match.
• Want to improve participation? Adjust eligibility or auto features.

A “good” plan is strategic.

6. You Have an Advisor Who Goes Beyond Investments

A great 401(k) advisor should:

• Act as a true plan advocate
• Help structure and refine plan design
• Coordinate with your service providers
• Step in quickly when issues arise
• Recommend solutions tailored specifically to your plan
• Provide ongoing strategic guidance throughout the year

The right advisor rolls up their sleeves and is involved all year long.

Quick 401(k) Plan Self-Assessment

Answer yes or no:

☐ We feel confident in how our 401(k) plan works

☐ We have a current Investment Policy Statement (IPS)

☐ Participation is above 80%

☐ Auto-enrollment is in place

☐ Employees receive ongoing education throughout the year

☐ Plan administration feels organized and manageable — not reactive or overwhelming

If you checked fewer than 4 boxes, it may be time to take a closer look at your plan’s structure and oversight.

A well-run 401(k) plan:

• Is cost-efficient
• Encourages saving
• Is well-documented
• Aligns with company goals
• Helps employees move toward financial independence

It’s not about having a plan.

It’s about having the right plan for your business.

If you’re unsure where your plan stands, a structured plan review can provide clarity. 

Sometimes small adjustments – better auto features, updated investments, or improved benchmarking – can make a big difference.

Because at the end of the day, a great retirement plan doesn’t just check a box.

It builds futures.