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Why Certify Retirement Plans?

The administration of 401(k) and similar plans have escaped the scrutiny of corporate responsibility while all other aspects of a company garner accolades for being champions of ESG. The company retirement plan is as much a part of any company as its payroll, but has never been evaluated with the same degree of diligence regarding its effect on the environment, social impact and governance.

The ESG Certification of Retirement Plans addresses these omissions through independent evaluations of 401(k) and similar plans. These evaluations integrate the corporate responsibilities under law with ESG best practice standards. The recognition of compliance with the law and ESG standards adds value for the responsible company that include:

• Spotting issues before consequences arise
• Improved retirement plan benefits for employees
• Independent validation of the quality of the retirement plan
• Increased appeal to high quality talent

Employee Interest in Retirement Plan ESG

Employee surveys show overwhelming favorability for retirement plans that adhere to ESG standards. By a margin of more than two to one, employees report they:

• Would be more likely to participate in the plan
• Would contribute more to the plan
• Favor employers who certify their plan

The Standards

The ESG Certification of Retirement Plans consists of three groups of factors that are weighted to influence adherence instead of having mandates. This enables companies to make trade-offs with respect to their own business interests. The factor groups include:

Awards

Three levels of awards are granted to permit a relatively low hurdle to entry and encourage improvement to a superior level over time. Award levels are:

Evaluation Process

The evaluation process starts with a questionnaire about the retirement plan and its characteristics. Much of this information can be provided by the plan’s record keeper.

The information is then crosschecked and validated by Dalbar and the results scored based on the list of weighted factors.

A preliminary report of findings is produced for review by the company so any discrepancies can be resolved and a plan of action created.

When applicable, the appropriate award is granted to the company.