Why would a Plan Sponsor conduct a record keeper search when all seems going well? Sometimes companies that sponsor a defined contribution (DC) plan like a 401k or 403b get complacent about the providers they use to service their plan, especially the record keeper. If nothing is going wrong, why change or even conduct a search? But the 401k administrator at a large electronic manufacturing company attending a TPSU program at Manhattanville College explains how their RFP (request for proposal) process greatly enhanced services while reducing costs.
First, it is the fiduciary responsibility of an ERISA plan fiduciary to make sure that fees are reasonable for the services rendered. Which is hard to determine unless an RFP is conducted regularly, usually every three to five year depending on the size of the plan and company changes. So even if turns out that the fees are reasonable with the current provider, a documented prudent process is required.
So as a result of their record keeper RFP, this large manufacturer was able to reduce costs, dramatically increase employee education as well as provide investment advice to participants. The driving factor for this plan administrator was the realization that she needed to go to market and that it had been a while. Using a consultant to help through the process to find a new record keeper, which was a different process they used to find an advisor, the 401k administrator was amazed about the new services available since the last time they made a change.
The main factors that led to their new provider included enhanced technology, especially the ability to reach younger workers, as well as the vast array of educational topics and resources offered.
The DC industry is changing, especially for record keepers who are consolidating at a rapid pace because it’s hard for smaller providers to keep investing in new technology. Not only do plan sponsors have a legal obligation to periodically conduct a record keeper RFP, they might be surprised about the new service available for lower fees which will not just help the company but could greatly improve the retirement security of their employees.
