Plan Sponsor Series 4: Six Questions for Your Next 401(k) RFP
Originally published by Lance Reising on September 29, 2015.
It's Form 5500 submission time (or extension period time), and hopefully with that, a time to review and reflect on your 401(k) plan. It is a great time to thoroughly review your plan and seek to improve, develop, or change things.
A great way to do that is to put out a Request for Proposal, or RFP, for your 401(k) plan to see what new developments are out there and how you might be able to improve your plan.
The industry is evolving rapidly. A new paradigm shift is occurring as passive investments such as index funds are dominating the money flows into the markets. How many low-cost index funds does your plan offer?
There are many templates for an RFP you can find in "all shapes and sizes", but the article here by Nevin Adams raises six questions which are on point and which may not be included in your template.
- What plan design changes would you recommend and why? You may learn more about your plan and the proposer(s).
- How many other clients like me do you have? A great source for references.
- Are there any restrictions on fund choices? Helps sort out proprietary service provider interests, possible conflicts of interest, and if proposed plan design is open architecture.
- What's Your Preferred QDIA? (Qualified Default Investment Alternative) It's best to know the options so you can make the best choice for participants.
- How - and how much - do you and your other partners get paid? There are big differences with big implications in "how" providers get paid and how transparent the "how much" might be.
- Please provide the contact information for three clients that have left you in the last 18 months. You never know what you might learn...
The Supreme Court has now formally decided that plan sponsors have an ongoing duty to monitor their 401(k) plans and their investments. This is a great time of year to do so. And obviously, we would love the opportunity to offer our perspective.