Key metrics that define a healthy plan

Why do retirement plan metrics matter?

A retirement plan should evolve over time alongside your workforce. As your organization changes and employees' financial situations shift, regularly reviewing plan data helps ensure the plan continues to hit its targets. Monitoring key metrics can help you:

• Identify areas where employees may need more information
• Evaluate whether the plan provides sufficient retirement savings
• Measure overall employee engagement
• Monitor the effectiveness of the plan's structure
• Support thorough plan oversight and fiduciary decision-making

Reviewing these metrics over time often provides more useful insight than looking at any one in isolation.

Participation rate

Participation rate is the percentage of eligible employees who choose to enroll in the plan.

Example: If your company has 200 eligible employees and 170 are contributing, your participation rate is 85%.

This is one of the most important indicators of a healthy plan. If participation is lower than you'd like, consider whether employees would benefit from additional education, automatic enrollment, or improved communication about the plan's benefits.

Average contribution rate

Participation is only part of the picture — it's also important to know how much employees are saving. The average contribution rate measures the percentage of pay participants contribute toward retirement.

Example: An employee earning $70,000 who contributes 5% is saving $3,500 each year toward retirement.

If this rate is lower than expected — especially if employees aren't taking full advantage of matching contributions — you may want to encourage higher saving through education or automatic contribution increases.

Employer match utilization

If your organization offers matching contributions, a valuable metric is how many employees contribute enough to receive the full match. Those who don't are effectively leaving part of their compensation unclaimed.

Example: Your company matches up to 5% of salary. An employee contributing only 3% would not receive the full employer match.

Tracking this metric helps identify whether employees fully understand the value of the matching program.

Average account balance

While account balances naturally differ by age, salary, and years of service, reviewing average balances across your workforce provides insight into retirement readiness. Comparing averages across age groups or experience levels can highlight which groups might benefit from additional education or planning resources.

Account balances are most meaningful when considered alongside contribution rates, participation, and employee demographics — rarely in isolation.

Investment diversification

A strong plan encourages participants to maintain a diversified portfolio rather than concentrating savings in a single investment.

Target-date funds are popular because they automatically adjust allocation as the target retirement date nears. Others build diversified portfolios using the mutual funds, index funds, and bonds available in the plan. Reviewing participants' investment trends helps determine whether additional education may be beneficial.

Loan and hardship withdrawal activity

Occasional loans and hardship withdrawals are expected, but consistently high usage may signal that employees are experiencing financial stress. Frequent withdrawals reduce retirement savings, interrupt long-term growth, and leave participants less prepared.

If these transactions become common, consider supplementing the plan with financial wellness initiatives — budgeting resources, emergency savings education, or debt management programs.

Plan fees and service provider performance

Maintaining a healthy plan also means periodically assessing fees and evaluating service providers. Review whether recordkeepers, investment advisors, and other providers continue to meet the organization's needs and whether their costs remain reasonable. Periodic benchmarking helps determine whether your plan stays competitive against similar plans.

Measuring success over time

No single metric determines whether a plan is healthy. Instead, evaluate several measurements together and monitor how they change over time.

A gradual increase in participation, contribution levels, match utilization, and engagement often signals a plan moving in a positive direction. Spotting downward trends early gives sponsors a chance to make improvements before larger issues develop.

The bottom line

A healthy retirement plan improves employees' financial well-being while supporting your organization's goals. By regularly monitoring key metrics, plan sponsors can make informed decisions that strengthen the program over time. If you have questions about evaluating your plan's performance or identifying opportunities for improvement, reach out to your plan advisor today.