When to Fire Your Provider

As much as you might have come to like and even enjoy working with your 401(k) and 403(b) service providers, quoting the late great Beatle George Harrison, all things must pass. Even if they’re doing a good job, you have the duty to periodically review their services and fees and make what may seem like a harsh decision. For example, if the company has grown substantially, they may no longer be the right fit. ERISA attorney Ary Rosenbaum lays out 8 signs that it may be time to move on.

First let’s review the key service providers that help companies run their DC (defined contribution) plan:

1. Plan advisor – investment review, plan design, employee education, limitation of liability and overall quarterback
2. Record keeper – technology and keeping track of accounts
3. Third Party Administrator (some bundled record keepers do not use TPAs) – compliance, plan design and consulting

What are the signs that it might be time to move on?

1. They don’t disclose their fees in an easy to understand format.
2. The advisor or TPA shows up rarely and is not doing the basics like quarterly investment reporting by the advisor and evidence that the plan is in compliance by the TPA.
3. Not proactive – you call them more than they call you.
4. Too many errors and, when they make them which is inevitable, they blame others and take too long to fix them.
5. The advisor is a family member or has a close personal relationship with a plan fiduciary or key employee but is not qualified.
6. They don’t bring you news ideas or proactively alert you to new laws.
7. The fees are too high for the services provided which only comes through benchmarking or RFPs.
8. They don’t teach you expecting you to understand what they do – they need to hold your hand.

Change is hard especially when it comes to firing someone you know and may like. But even though you may be overwhelmed and your company’s retirement plan may not be the most important task on your plate, taking action when needed will not only result in less work and stress for you as well as better outcomes for your employees, it’s the law which does carry significant repercussions if not followed.