1. 22 Kentucky SHRM Magazine
Hot Topic
T
he Request for Proposal (RFP) process for a company’s
qualified retirement plan (“Plan”) documents the
due-diligence process in which the Plan providers are
selected. Using an RFP can help to find more cost-efficient
plan options and educate the Plan’s fiduciary stewards (Plan
Sponsor, Retirement Plan Investment Committee and Plan
decision makers) on the different level of services offered by
the industry’s service providers.
In court case George v. Kraft Foods, 2011 WL134563 (7th
Cir. 2011), expert testimony claimed that automatic renewals
of service provider contracts should not occur without
soliciting bids from other providers through an RFP process.
The Department of Labor noted that “even very large,
relatively sophisticated plan sponsors shop for services only
periodically, generally once every three to five years” while
discussing the need for additional disclosures to alleviate
the information advantage that vendors have over their plan
sponsor clients. While the message above doesn’t establish a
fiduciary standard, it suggests the DOL would recommend
shopping your plan every three to five years as a minimum
requirement, thus a best practice for fiduciaries.
Despite the benefits, it appears very few plan sponsors
have issued an RFP in the last five years. A survey by Plan
Why RFPs Are
Worth the Effort
Sponsor magazine in 2011 indicated just over a quarter (27.6
percent) of the subscribers had ever benchmarked their
plans via an RFP process.
The following prominent misconceptions may be keeping
fiduciaries from conducting an RFP:
1You have to replace your current provider: Issuing an
RFP in no way forces you to move to a new provider.
A 2012 study by the Anova Consulting Group found that
31 percent of the companies that issued an RFP chose
to stay with the incumbent provider. Think of the RFP
process as though you are “shopping around.” If your
current provider offers a competitive plan with qualified
service, then you can document your committee’s justified
decisions of retaining the current providers.
2You’ll be hounded by sales reps: Yes, professionals
who respond to RFPs are looking to earn your
business. However, if you clearly state how the service
provider’s representative should communicate with you
and what information you are looking for, they typically
will respect your directive. Finally, once you communicate
that you have chosen a different provider, everyone will
move on to the next opportunity. Not providing the
candidates with a straight and honest response is what
keeps them around asking questions.
3The amount of information to review is
unmanageable: Start by prioritizing what are the
most important service standards for your Plan. Then
develop a RFP focusing on such issues. As you receive
the responses, you will need to narrow down the options,
typically to around three to five valid candidates. Then
ask more focused questions to help guide you to the most
appropriate two to three candidates. At this point, a finalist
presentation can be conducted.
4You have to be an expert and do it alone: You
can utilize resources from SHRM and other
organizations that offer step-by-step instructions and
By Jeanne Fisher, CFP, MBA and Kristin Dunlevy, AIF
