10 Best Practices For Conducting a 401(k) Provider RFP

Selecting the right retirement plan recordkeeper is a critical decision for plan sponsors. An effective Request for Proposal (RFP) process ensures that a recordkeeper can meet your plan’s needs and support participant services. Here are ten best practices for conducting a successful RFP for retirement plan recordkeeping services.

 1. Define the Purpose and Scope of the Retirement Plan RFP

First, outline the goals of the RFP. Common reasons for issuing an RFP include dissatisfaction with current services, benchmarking, or significant changes to the plan. Determine the scope of services required, such as administration, participant services, and compliance support. Clear objectives will help you establish evaluation criteria and communicate expectations to potential vendors.

 2. Establish a 401(k) RFP Committee 

Create a cross-functional team that includes HR, finance, legal, and other key departmental representatives. In addition, hiring a retirement plan advisor can be invaluable. They can help you navigate the complexities of the RFP process, provide insights into different recordkeepers, and ensure that your RFP is comprehensive and clear.

The RFP team should have a timeline with key milestones, from drafting the RFP to vendor presentations and final decisions.

 3. Prepare a Comprehensive Provider RFP Document

The RFP document should provide potential recordkeepers with a complete picture of your retirement plan and what you expect from their services. Key components of a comprehensive RFP document include:

• Plan Overview: Include details about the plan size, number of participants, contribution levels, and types of investments. This information helps vendors tailor their responses to your plan's specific needs.
• Scope of Services: Outline the services you require, such as participant communications, online tools, customer service, compliance, and reporting. Be specific about any unique requirements or preferences.
• Evaluation Criteria: Describe the criteria you will use to assess proposals, such as cost, service capabilities, technology, participant support, and compliance assistance.
• Questionnaire: Include detailed questions covering areas such as technology, cybersecurity, customer service, investment options, and fees. Be sure to include open-ended questions to allow vendors to explain how they differentiate themselves from competitors.
• Fee Structure: Request a detailed breakdown of fees, including any potential hidden costs. A transparent fee structure is essential for comparing costs across vendors.
• References and Case Studies: Ask vendors to provide references and case studies that demonstrate their experience with similar plans. Speaking with other clients can give you valuable insights into a vendor's strengths and weaknesses.

 4. Issue the Retirement Plan RFP and Communicate with Vendors

Identify potential vendors based on research and issue the RFP, providing clear instructions on submission requirements and deadlines. Allow a reasonable timeframe, usually four to six weeks, for responses. Establish a point of contact for vendor questions and keep a record of all communications.

 5. Evaluate Proposals both Quantitatively and Qualitatively

With the RFP responses in hand, your team can begin evaluating proposals. Using a scoring system can help ensure objectivity and consistency. Assign weights to each evaluation criterion based on its importance to your plan, and then score each proposal accordingly. Key evaluation areas include:

• Service Quality: Consider the level of participant support, availability of online tools, and quality of customer service.
• Technology: Evaluate the vendor’s technology capabilities, including participant portals, mobile apps, cybersecurity, and data management systems.
• Fees: Compare costs and fee structures across vendors to ensure you’re getting value for your investment. Be cautious of low-cost proposals that may compromise service quality.
• Compliance and Fiduciary Support: Ensure that the vendor has a strong track record of compliance and provides resources to help you meet fiduciary responsibilities.
• Vendor Stability and Experience: Assess the vendor’s financial stability, industry experience, and reputation. A stable, experienced provider is likely to be a reliable partner over the long term.

 6. Conduct Finalist Interviews and Site Visits

Once you’ve narrowed down your choices to a few top contenders, schedule finalist interviews and, if feasible, site visits. This stage allows you to interact directly with the vendor’s team and get a sense of their culture and approach to service. Use this opportunity to ask specific questions about their proposal and clarify any concerns.

A site visit can provide valuable insights into the vendor's operations, technology infrastructure, and customer service practices. You can also observe the vendor’s workplace culture, which can impact their service quality and participant experience.

 7. Request and Review References 

Even if a vendor performs well during the proposal and interview phases, it’s essential to validate their claims through references. Reach out to other clients, preferably those with similar plan sizes and structures, to learn about their experiences with the vendor. Ask about the vendor’s strengths and weaknesses, response times, service quality, and any challenges they encountered.

 8. Negotiate Contract Terms

Once you’ve selected a preferred vendor, negotiate contract terms to ensure you get the best possible arrangement. Key areas for negotiation include:

• Service Levels: Define service level agreements (SLAs) that set clear expectations for performance metrics such as response times, transaction processing, and participant satisfaction.
• Fees and Pricing: Clarify any potential fee increases, hidden costs, or penalties for early termination.
• Data Security and Privacy: Ensure that the contract includes provisions for data security, privacy, and incident response.
• Termination Clauses: Include terms that allow you to terminate the contract without excessive penalties if the vendor fails to meet SLAs or if your needs change.

9. Finalize the Transition Plan

If you are switching recordkeepers, develop a detailed transition plan that minimizes disruption to participants. The transition plan should include timelines, key milestones, communication strategies, and participant education initiatives. Work closely with the new recordkeeper to ensure a smooth transfer of data, assets, and services.

 10. Monitor and Review Performance Regularly

Selecting a recordkeeper is not a one-time task. Ongoing monitoring and periodic reviews are essential to ensure that the vendor continues to meet your plan’s needs. Schedule regular meetings with the vendor to discuss performance, review service reports, and address any issues that arise. Additionally, consider conducting a formal review every three to five years to assess the vendor’s competitiveness and determine whether an RFP is necessary.

Final Thoughts on the 401(k) Provider RFP Process

 A well-structured RFP process for retirement plan recordkeepers allows plan sponsors to make informed decisions that benefit both the organization and its participants. By following these best practices, you can secure a partnership with a recordkeeper that aligns with your goals and supports your participants’ retirement readiness.

This process is much easier with a trusted partner by your side. World is here to help. If you have any questions or would like an advisor to support you thought this process, please reach out to us.