At a TPSU program conducted at the University at Shady Grove, a CPA firm explains the process they went through to find a new record keeper. Using the plan’s advisor, the process was relatively painless and saved money but the key was meeting the person that would be working on the plan day to day with rather than just sales people.
Working with her advisor, the plan sponsor prepared a set of questions that was sent out to eight record keepers recommended by the advisor which ended with four finalists. The process took just six to eight weeks from start to finish. Not only were they are able to lower fees by “..cutting out a middle man”, they selected the best vendor. And they did not pick the cheapest vendor – under ERISA, fees have to be reasonable, not cheap.
Maybe it was a coincidence, but the plan sponsor selected a record keeper who not only brought the sales person to the finalist meeting, they brought the service person who would be working with the plan. Only one other finalist did the same. It might seem subtle, but record keepers that bring service people to finalist meetings are not just smarter, it shows that they value and trust their service people which means they will keep and attract better people.
Looking back, the plan sponsor says she would have asked more questions about employee communication which is becoming more and more important to the overall success of the plan but overall, she was happy with the process which was relatively painless resulting in better service and lower fees.
How often should employers sponsoring a defined contribution (DC) plan go to market for their record keeper? The accepted wisdom is three to five years depending on the size of the plan and changes to the company. The DC world changes dramatically every three to five years and most companies, adjusting to a fast moving global economy change as well. With significant provider consolidation, which is only going to continue, conducting a periodic RFP for record keepers makes sense; which also includes your advisor, by the way.
