Yes, I Know You Don’t Want to Conduct a Retirement Plan Recordkeeper RFP. But Here’s Why You Should.
Recently, I spoke at the American Law Institute CLE Program for Benefit Plans of Tax-Exempt and Governmental Plan Employers on the subject of request for proposals, or RFPs. The fact that a bunch of attorneys would decide that this was a good topic to which to devote their time should tell you all you need to know about the importance of RFPs.
But yes, I know, you hate retirement plan recordkeeping RFPs. They take up time (6-9 months, depending on whether you change recordkeepers as a result) and money, both of which most HR departments lack these days. And they can result in employee disruption if the recordkeeper is changed.
As a retirement plan consultant, I can emphasize RFPs are a huge amount of work for us as well. So why should you do one if you’re a plan sponsor? Well, despite the time, money, and employee disruption, there are just too many benefits to an RFP to go for long without doing one; including the following:
- You’ll likely save your employees (and yourself, if you participate in the plan) a lot of money-- Recordkeeper pricing has never been more competitive, and in almost all cases the only way you’ll obtain a recordkeeper’s best pricing is through an RFP process. Additionally, you will likely save many times the cost of what you spent on the RFP in terms of time and labor, considering the cost savings are annual, and the expense is only one-time.
- You’ll most likely save a lot of time and effort in the long run—Is there any aspect of your current recordkeeper relationship that is currently time consuming? If your answer to this is “yes” (and for most plan sponsors, there is more than one recordkeeper “time-waster”), then you can structure your RFP so that time-consuming tasks are taken off HR’s plate by the winning bidder, even if the incumbent is the winner!
- The employee “disruption” factor is overhyped—In nearly 27 years of working on RFPs, you know how many times I’ve encountered significant employee pushback regarding the process? Once. In fact, the transition to a new recordkeeper, or even an existing one (as the new offering as the result of an RFP can be dramatically different, even for an incumbent recordkeeper), can often be a positive experience for employees, if properly communicated.
So, if it’s been awhile since the last time you’ve conducted an RFP for a retirement plan recordkeeper (or you do not even recall when the last RFP took place), you may wish to consider it. What are your thoughts on RFPs and their frequency? Hit me up on Twitter or at email@example.com.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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