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401k RFP Process Looks at Fees

401k RFP Process Looks at Fees

401k RFP processes focus on many aspects of a 401k plans, including fees.  In many cases plan sponsors are being charged a reasonable fee-for services. However, if a Plan Sponsor does not take the time to view the competitive offerings of other service providers, it is impossible for plan fiduciaries to know if the fees being paid are reasonable.

At the conclusion of a TPSU program held in Baltimore, Maryland, at the location of Loyola University, Fred Barstein, Founder and CEO of The Plan Sponsor University (TPSU), met with Chip Merrick, the Adjunct Lecturer for The Plan Sponsor University on-campus program. Chip is an Executive with RCM&D which has a footprint reaching from Philadelphia, PA to Richmond, Virginia.  Mr. Merrick delivers investment and retirement plan consulting services for 401(k), 403(b), DB and NQDC plans. His firm also provides fiduciary guidance and protection related to investment monitoring, fee benchmarking, and RFP searches.

Chip explains the logic for establishing a quarterly monitoring process for the investments within a tax-qualified retirement plan. Moving beyond the all-important regular monitoring associated with a plan’s investments, Mr. Merrick discusses with Mr. Barstein, what occurs during a plan-takeover situation or when a Plan Sponsor’s vendor is acquired.

Full Transcript Here

Fred Barstein:
Fred Barstein with 401k TV where we just completed a TPSU program here outside of Baltimore at Loyola University. And I am pleased to have our adjunct lecturer adviser Chip Merrick join us. Welcome, Chip.

Chip Merrick:
Thank you, Fred.

Fred Barstein:
Okay if we ask you a few questions?

Chip Merrick:
Absolutely.

Fred Barstein:
So Chip has been a lecturer for TPSU in the Baltimore area now, in Richmond before, he’s an industry veteran, a CKP, works for a risk management firm that’s located from Philly to Richmond with headquarters in the Baltimore area, RCM and E, the and is very important on that. And he and his colleague Rob Kotler run their retirement group, which is really one of the largest in the area and growing very, very quickly. So Chip, one of the things that you brought up during the lecture and and running the program, and thank you for your support in that, it’s very important.

Fred Barstein:
What we’re doing is talking about the value of doing a record keeper RFP. And if you could explain that and explain why it might be important to do that versus just doing benchmarking.

Chip Merrick:
Absolutely. Thank you, Fred. Yeah. So what we do is we always recommend benchmarking in the RFP and there are two kind of different items, although a lot of people see them as the same. Benchmarking is great to do on an annual basis. We do it quarterly, as part of our review process, and it really focuses on the fees. The fees you pay the investment management fee, the fees you pay the record-keeper, and the fees you pay the consultant, the advisor, if you have one. And it does it against your peers and kind of what the peer groups charging and so on and so forth. But we think every three to five years, really every three years, that an RFP should be done and that really is a little bit more of an intensive process than just doing a fee benchmarking.

Chip Merrick:
We put the plan out for a live bid and we really see what the record-keeper, not just what they’re charging, but what are the services you’re getting for what they’re charging? It’s really one of the first things we do when we engage a client, a new client, is we do the RFP process. We are not looking to move the plan per se. I would say 90% of the time we don’t move the plan. We look at it more to make sure that the vendor that you’re currently with is doing everything they’re supposed to be doing and that the fees are in line with what other vendors would be charging.

Fred Barstein:
Right.

Chip Merrick:
To do a similar size plan, so not necessarily what your peers are paying, what vendors would be charging you kind of to do that plan.

Fred Barstein:
And also, it’s a time to reassess what needs and the plan needs, the company needs for their plan, right?

Chip Merrick:
Yeah, exactly. And we’ve had, just recently with Wells Fargo and the PNC’s getting out of the business or selling out of the business, when you get put with a vendor like and you don’t, you get put with a purchasing vendor, you don’t have the opportunity to go in there and really give them a choice to if they want to look at another vendor. And we think that’s really important nowadays, especially when all these acquisitions and that, really, the vendor world’s getting smaller, is a lot of times companies would just say, “Okay, well we’re going to this vendor because they just bought our vendor”. And that may not be the best vendor for you. So that’s another reason why we do the-

Fred Barstein:
You’re going to go through a conversion, anyway. You might make it your choice.

Chip Merrick:
Exactly. And it really is about negotiating fees and services, you know? That’s what it comes down to. Because I said, “We do not want to make a change if we don’t have to, but sometimes change is, it necessitates a change”.

Fred Barstein:
Very good. Well thanks for your time today and for our audience, all that knowledge and wisdom, and thanks for supporting and being part of our TPSU lecturers.

Chip Merrick:
Thank you.

Fred Barstein:
And thank you for watching 401k TV. Please stay tuned.

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