How Does Your Employer's 401(k) Plan Stack Up?

If your 401(k) plan isn't really helping you build your retirement savings, how would you know?
If your 401(k) plan isn't really helping you build your retirement savings, how would you know?

If your 401(k) plan isn't really helping you build your retirement savings, how would you know? To help the more than 60 million with these employer-based retirement plans figure out how they stack up, independent retirement plan ratings firm BrightScope has created its first ever list of top-rated 401(k) plans for each major market in the U.S.

Starting with the top 10-rated plans in New York, the lists will help employees find out what the best plans are offering their participants, say BrightScope founders Mike and Ryan Alfred, who announced the list on Wednesday. The lists will also make it easier for plan sponsors who want to benchmark their plan performance against those of competitors. They will also be of use to investment advisors looking to help companies better manage their plans better, the lists creators say.

The latest lists come after BrightScope produced a nationwide top-30 list of 401(k) plans last year.

A Union Comes Out on Top

Surprisingly, the top 401(k) fund in New York does not belong to a company at all but rather the union that represents operating engineers. The Board of Trustees I.U.O.E. Local 14-14B Annuity Fund is a multi-employer 401(k) plan. Many companies that employ engineers have banded together to create one larger plan, which earned a rating of 86 out of 100.

"It can be very cost competitive because if you are a small employer, you may not be able to get the pricing power that some of these larger firms do," notes BrightScope President Ryan Alfred. "But if everyone contributes to a multiple employer plan you can get more scale."

OppenheimerFunds Inc. was second on the list with a ranking of 84, followed by Skadden, Arps, Slate, Meagher & Flom LLP, Securities Industry Automation Corp., BlackRock Inc. (BLK), AllianceBernstein L.P. (AB), Debevoise & Plimpton LLP, Moody's Corp. (MCO), Keefe, Bruyette & Wood Inc. and The McGraw-Hill Companies Inc. (MHP).

Retirement Income Accumulation Speed

To determine the top-rated plans, BrightScope runs simulations using key characteristics to determine how quickly each plan accumulates retirement income for its participants. Each plan is judged individually on measures like its average salary deferral rate, employee match structure, performance of investments and fees charged to participants.

Using a 44 year-old employee with $30,000 as the constant variable, plans are rated on their ability to produce retirement income that would allow that employee to leave work and be able to replace 75% of their pre-retirement income each year. Plans reaching the retirement income threshold faster earn higher ratings.

"Typically, what is going to drive the higher ratings is high contributions from employees and very high matches from the employer -- those are going to be the two biggest factors," says BrightScope CEO Mike Alfred.

At Least $100 Million in Plan

The company says the local lists were intended to help people better understand which employers offer the best retirement plans in their immediate area. Each list only contains companies that have at least $100 million in their plan and are headquartered in that market. So for New York, the list is filled with large financial services firms and powerful law firms -- two industries that are dominant in the state.

On BrightScope's website (, employees can access the lists of the top-rated plans and other free information. Among the details are how competitive their company's employer match and fee costs are compared to other plans. By seeing the plans that companies are offering employees, consumers may take the independent research to their companies in an effort to make changes to their plans.

"401(k) Funds are now the primary source of American's retirement savings and there is more than $3 trillion at stake," notes Mike Alfred.

BrightScope Selling Software

BrightScope also sells software to plan sponsors that allows them to monitor what other companies are doing in the marketplace and helps them construct a better retirement plan, the company says. The information can help companies determine how to construct a plan, how to determine reasonable fee levels and how to choose a menu of funds.

Understanding how to make better choices when constructing the plan can help companies save costs that benefit workers and the company's bottom line, BrightScope says.

Originally published