4 Things Before You Get to That RFP…
Here are some considerations to keep in mind before you undertake a formal request for proposal (RFP).
Know What You’re Looking For
A good process will almost inevitably turn up something you hadn’t been looking for, and perhaps hadn’t planned on. That said, too many plans use this as something of a fishing expedition, hoping that something will stand out as an exception or issue that they can focus on.
However, if you don’t have some idea of where you are going, you won’t know when you get there, either.
Document Your Decision(s)
Whatever process you are using to evaluate your plan (including the rationale behind a decision that a process/review isn’t needed at the moment), the goals and objectives in doing so should be written down, as should the conclusions drawn from the exercise.
Odds are a formal benchmarking process or RFP will produce those conclusions/considerations as a natural outcome. But if it doesn’t, you should make the effort to make sure it does.
Consider the Benefits of Benchmarking
Done properly, an RFP is a lot of work, not just for those who respond to that request, but for the plan sponsor/fiduciary as well, both in terms of reviewing and comparing that information, not to mention determining if you need to take steps to replace your current provider as a result. And they can be expensive.
If your last full review was fairly recent (say, within the past five years), and there is no particular service issue(s) you are trying to remedy, you may want to consider undertaking a plan benchmarking study.
These range from reasonably formal affairs with firms that focus on those comparisons, to working with your plan advisor (which may utilize the services of a benchmarking firm), to a simple comparison of your plan features and results with industry surveys. The point of these is to allow you to compare your plan design and features against some benchmark, which can be a universe as broad as all retirement plans, but might more practically be against the designs of comparable plans, either based on organization size, location, workforce composition, or all of the above.
Depending on how sophisticated a benchmarking effort is undertaken, you’ll either get some recommendations for improvement, or have at your disposal some objective data upon which to determine what changes, if any, are desirable.
You may even receive validation that your current plan design is fulfilling your objectives and requires no change.
Give Your Current Provider a Shot
Anyone who has ever had to go through a plan conversion — even a smooth one — can attest to all the additional work, time and energy that is required in even the best of transitions. Consequently, and almost without exception, it will be easier, and generally less disruptive for plan administration and for plan participants alike to stay with the current provider. It may even be cheaper (don’t forget to include the costs of a move in your cost assessment).
However, the most commonly cited reasons for those movements is poor service — and that generally only after a long, consistent series of service issues. And if you’re having those issues — well, then maybe your current provider has already had their shot.
At least once a year — no matter how well things are going — it’s worth determining if your plan has access to the new services that have come online since you converted; that you are getting the advantages of the most current thinking about costs and fees, and how your plan’s participation, deferral, and asset diversification stack up.
And yes, even with a reliable and proactive provider, you may have to ask.
Benchmarking, RFI, RFP? Each has pros and cons in terms of cost, time and depth of analysis, but remember whatever path is chosen, and however frequently undertaken, prudent fiduciaries have an obligation to ensure that the fees paid and the services rendered to the plan, its participants and their beneficiaries, are reasonable.
Finally, if and when it’s time to make a change — make sure to give yourself (and your plan) enough time for the planning — and, if necessary, the move.