It is a good fiduciary practice to conduct a periodic review of the DC plan service provider to ensure that the participant assets are well-protected and tracked accurately. This should include a review of financials and SSAE 16 (internal control audits) annually. If the plan service provider has not been reviewed in a long period of time, or the plan has grown or changed dramatically in the number of participants, need for additional services and asset size, it is a good fiduciary practice to conduct a due diligence review which may best be performed through a request for proposal (RFP) for plan services.
Define the Objectives of the RFP
The detail and customization of the RFP will be determined by the key objectives of the RFP. Some typical reasons for sending out a RFP include:
Benchmarking to compare the current provider's fees and services in response to ERISA 408(b)(2)
Improving plan efficiency and delivery of services to the plan and its participants
Streamlining the administration of the plan through improved technology and automation
Expanding or enhancing the investment choices, advice, asset allocation solutions
Improving participant communications, education and participation rates
Seeking a change in provider's relationship team, response time and expertise
Establish Criteria
The plan sponsor should establish specific metrics to evaluate the providers to ensure that the key issues are addressed. Any specific restrictions or contract stipulations that are non-starters should be identified at the onset. When crafting the RFP, it is important for a plan sponsor to identify their organization's unique priorities, objectives and preferences. Some criteria may include conversion timeline, minimum performance standards, fees, call center and on-line participant access, investment options and organizational flexibility. A client service-oriented provider will be willing and able to tailor its services to the plan sponsor's specific needs.
Plan Information
Make the responses specific and relevant to your plan by providing sufficient information and data about the plan features, asset mix, cash flows, employee demographics, and current investment line-up. Include any new services desired and their importance to the overall decision.
Evaluate the RFP Responses
Quantitative criteria include sponsor and participant service measures, plan use data, fund performance, expenses and timing. These tend to be easy to compare and understand, though they tell only a fraction of the provider’s full story. Financial stability in the wake of the financial crisis is critical to continuously offering high quality plan services. Financial strength ensures high quality personnel, up-to-date enhancements to systems and improvements in compliance and delivery of participant services.
The Committee should be clear on what aspects of the RFP are critical to the selection of a qualified service provider based on the criteria established prior to issuing the RFP. Developing a scorecard is a helpful tool when evaluating RFP responses and will streamline the process. The evaluation should be presented to the committee and finalists selected based on the results.
Education
Education should be accessible through multiple channels such as paper, webinar, in-person, on-demand information, and live representatives. Call centers need qualified, expert representative that are responsive to participant requests. There should be a broad menu of education media including user-friendly on-line tools, retirement calculators, retirement income education, publications, newsletters, investment information, on-demand educational tools and in-person seminars. Beware of marketing material masquerading as investment education.
Compliance
Compliance expertise has taken a central role in this time of increased regulations. Providers should demonstrate specific cases where they provided solutions to plan sponsors to meet new regulatory requirements. Strong providers will have updated technological tools, operational procedures and legal expertise that ensure the plan is compliant with the changing regulatory landscape. Plan design recommendations from providers are also very useful in a rapidly evolving regulatory environment. Plan sponsors should understand the provider's compliance resolution process and how proactive they are in ensuring the plan remains in compliance.
Finals Presentations
Once the finalists have been determined, they should be notified and sent an agenda for the presenters to follow. The absence of a detailed agenda will allow the provider with the best showmanship, and not necessarily the best product, to win the business. The key client service and relationship personnel that will actually be handling the account on a day-to-day basis should be present at the finals presentation. The finalist in-person presentations should highlight the relationship services. Using a common agenda with each finalist will also make is easier to make truly apples-to-apples comparisons. The way some firms answer certain questions may actually point out deficiencies in other firms. A knowledgeable and experienced retirement plan consultant can highlight these differences and explain their implications on the plan sponsor's plan.
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