Requests for proposal (RFPs) and their “cousin” the RFI (request for information) have long been an integral part of fulfilling the obligation to ensure that the services rendered (and fees assessed) for a plan are reasonable. This week we asked readers what they’re seeing, saying, and recommending.
We started by asking readers how often they recommended retirement plans conduct an RFP (in average):
61% - Every 3-5 years
18% - At least once every 5 years
11% - Only when needed
6% - Every 5-7 years
2% - Every other year
2% - Every 7-10 years
Reader comments:
Only for more complex or larger plans—all other 5-7 is prudent so long as we do an annual fee review.
Only because the insurance companies are forcing our hand. We fee benchmark annually and get market pricing for our clients to review. Then if all is in line and the client is happy—who wants to take time to do a RFP?
The timing depends on several factors related to the plan. Not the least of which is asset or participant growth that could require more work by providers.
Benchmarking (done correctly) is sufficient to meet the needs of sponsors
Benchmark with live bids every three years (or more often if conditions warrant). RFP every five to seven years.
We do annual fee benchmarking and periodic RFIs to gather competitive pricing bids.
We believe the need to perform benchmarking should be aligned with the demographics of the company. Have there been substantial changes in size or age of the workforce? Significant changes in the company, its structure and strategic plan can also indicate it’s time to review benefits.
The landscape has changed in relating to whether a comprehensive RFP or RFI, or a limited scope RFP or RFI is needed. Improvements in obtaining conducting fee and service benchmarking (Fiduciary Decisions, Benetic, etc.) over the years due to information available via 408(b)(2) and 404(a)(5) disclosures provides more flexibility in determining the scope of any RFP or RFI.
Larger plans every other year, the balance between 3 & 5 years.
We do every 2-3 years or if a plan has grown at an unusual pace.
We independently benchmark our clients’ services and fees.
Fee benchmarking is done every 3 years, mostly with a benchmarking tool. Occasionally we will request pricing proposals in lieu of the benchmark report if there is a need by the client. Full RFPs are really limited to clients who are seriously considering a vendor change and have specific issues with the current vendor that warrant a deeper dive into the services/procedures of new vendor options.
Interest ‘Ed’?
We then asked if they had noticed plans having more—or less—interest in doing full-blown RFPs during the pandemic.
54% - Less interest during the pandemic
30% - No real difference in interest during the pandemic than before
9% - More interest in RFIs than RFPs
7% - More interest during the pandemic
Reader comments:
Too “busy” in the HR department to prioritize 401k in general
They rely on us for suggestions on RKs and TPAs. We issued the same annual number of RFP responses for advisor services pre- during- and post-pandemic.
Function of staffing on the plan sponsor side
Definitely Covid has led to more employers doing RFPs.
No company wants to make a change unless they are suffering significantly from service difficulties. Part of our job as advisors is to require that this work be done incident to our service agreement. We ensure our clients have reduced their risk as much as possible.
The current process isn’t good, it’s a dog & pony show with the buyers buying a sales presentation that often times can’t back up their bold new crap they claim to be able to do. Needs of the plan should be carefully considered before venturing into the nonsense we currently call ‘The RFP’!
Focus was on getting through the pandemic.
One of our busiest times for recordkeeper RFPs ever
We then asked if readers had noticed RFPs including questions on diversity, equity and inclusion—once again, the responses were varied.
38% - No.
28% - Some, but not most.
15% - A few, not many.
9% - Most now are.
6% - No, but I look for ways to include that reference.
2% - Nearly all are.
2% - It’s common.
Similarly, we asked if there had been any noticeable trends with regard to questions about corporate social responsibility (CSR):
38% - No.
26% - Some, but not most.
19% - A few, not many.
11% - Most now are.
4% - No, but I look for ways to include that reference.
2% - Nearly all are.
And then we asked readers if there was a particular area (besides fees) that they most like to hone in on. Here’s a sampling:
An RFP is equally weighted in my practice
Financial Wellness
Functionality for all involved. Service levels
Payroll integration capabilities
Services. Fees can be cheap or they can be expensive. Who cares. What services are commensurate with the fees.
Participant engagement
Participant experience Cyber security
Quality of services and experience for service of their plan type
Culture of the firm
Our firm always leans into any questions that actually matter to an employer achieving success with their retirement plan, 1) Plan Governance (evidence of fiduciary execution) and 2) Participant Outcomes (are employees on track for a secure retirement or not).
Service and follow up from the plan providers. I don’t know how user friendly their platforms are for the sponsor’s administrative staff.
I think the oddest question I’ve seen is, “How many plans have left you?” I know what they’re getting at, but I go on to explain how many were affected by mergers and acquisitions. So I look for the odd questions that stand out. I know they are asking normally because they’ve gotten burned in that area.
Participant service—is interaction strictly digital and can the service provider accommodate paper transactions. Paper is becoming increasingly rare and is eliminating many service providers from consideration.
Cybersecurity
Cyber employee engagement employer service payroll connections
Service levels. With the fee race to zero, many firms have cut back on their service levels and are pushing more administrative and compliance functions back on the plan sponsor. As a result, a better understanding of who is doing what and who is responsible for what relating to the important behind the curtain administrative and compliance details is very important especially for the micro, small and mid-sized plans. We have added positions in our firm to fill many of these gaps.
Ways the recordkeeper can take more work off of the plan sponsor and provide greater technology integration.
Expertise/Experience
Service standards, payroll integration
Participant services and participant outcomes. Not just plan design driven results, but actual ones that drive participant engagement, which is now and always has been the biggest challenge in the Retirement Plan Industry.
Cybersecurity!
Current recordkeeper\TPA
Services
Fiduciary duties and responsibilities
Service-related topics—dedicated account manager/service representative, website capabilities, processing workflows.
Other Comments
Cyber security is the biggest change in focus in recent months/years.
RFPs are necessary but advisors, TPAs, and RKs are masters of the art of the hidden. Regardless of RFP, RFI, or benchmarking, it’s extremely hard for some of the most talented retirement advisors, not to mention clients and their committees, to truly break the comparisons into apples-to-apples. I’ve mastered it but, then again, I’m former DOL with 36 years of experience and I study this nearly constantly.
Current RFPs are literally terrible. Most are a complete waste of time the way they are designed and most look the same, like they all came from one awful original template back in 1975!
Providers not being selected may decline future requests.
We perform a single RFI for our book of business and Providers are invited to update their responses as conditions change. Our scoring system take plan sponsor preferences and objective into consideration so that the best matches are recommended for each plan sponsor.
It’s a time-consuming project that does not guarantee or even resemble the claims.
The traditional RFP and RFI is not as important as a modified RFP and RFI that focuses on the key issues important to the plan sponsor. That may be administrative, compliance, investments, due diligence, fiduciary issues and training, or financial wellness.
Recordkeeper consolidation has caused us to complete significantly more RFPs in the last few years than usual. I am considering moving to a schedule of only completing an RFP right before a plan document restatement for all my clients unless they are unhappy with the recordkeeper or have to move for some reason (consolidation).
Still not seeing a ton of non-recordkeeper service provider RFPs, even advisor RFPs are nowhere near the level of recordkeeper RFPs.
RFI are easier specifically if we already know the recordkeepers services so a simple RFI with a fee quote can work.
We find RFIs are principally a benchmarking exercise whereas elective (as opposed to mandated) RFPs tend to signify genuine motivation/interest in considering change.
Thanks to everyone who participated in this week’s NAPA-Net Reader Radar poll!
