Selecting an appropriate investment and administrative structure for a qualified retirement plan is a significant and crucial task, yet there is no single formula for determining the preferred structure, according to a new white paper from SageView Advisory Group.
The selected investment structure has a direct impact on the degree of fiduciary liability retained, and the selection of investment and administrative vendors has operational, liability management and employee relations implications. In “Selecting Vendors for your Defined Contribution Plan,” author Jon Chambers, a Managing Director with SageView, reviews the essential issues and offers a checklist to guide the selection process.
Among other things, he suggests that instead of initially focusing on vendor selection, plan sponsors should first determine which component elements are most appropriate for the plan, including:
- What investment structure (or combination of structures) is most appropriate for the workforce?
- What type of administrative configuration can most effectively deliver the services necessary to support the selected investment structure?
Once a plan has reached some preliminary decisions regarding appropriate structures, Chambers suggests they are ready to proceed with vendor selection. This, he explains, is generally best accomplished through a formal Request for Proposal (RFP) process, where a cross-section of service providers is asked to respond to a set of questions addressing three primary areas:
- investment offerings, performance, diversification and fee structure;
- service capabilities and responsiveness; and
- administrative fees, expenses and pricing structure.
During the selection process, Chambers emphasizes the importance of demonstrating procedural prudence and ensuring that the chosen investment structure, administrative configuration and service vendors are appropriate for a plan’s employee population. “Whatever the selected path to compliance, managing fiduciary liability management demands complete, written documentation of the decision-making process and of the objective criteria used for all evaluations (both initial and ongoing) of products, vendors, and service providers,” he writes.
