Typically, in the arena of larger institutional retirement plans, more and more smaller plan committees are utilizing requests for proposal processes to perform the necessary due diligence when selecting a service provider such as a record keeper, adviser, TPA, or other. The RFP is a time-consumptive and demanding procedure — for both the questioner and responder. Having both written and answered a number of RFPs, I can attest to the depth that they can go into.

However, I would also argue that it is one of the most prudent ways for a plan sponsor to not only meet their fiduciary duties under the 408(b)(2) regulation for understanding fee “reasonableness,” but also allow them to cut through the noise of service provider features to identify the services that their plan and participants need. The process may be long, but when conducted in a thoughtful, formulaic manner, it’s very rewarding to plan success.

Also see: "IRI to focus on fiduciary rule, 401(k) enrollment."

The first step to an effective RFP questionnaire is for plan sponsors to identify the unique needs of their plan and participant pool. As I often stress, no two scenarios or plans are going to have the exact needs. As an example, if an organization is more tech savvy, then increased online and mobile capabilities of the provider will be something that should be explored. If the digital experience doesn’t seem to be of importance, then why pay for a service that won’t be utilized?

Know your audience

To bring the complication to another level: Specific needs will be entirely dependent on what service provider a plan sponsor is requesting additional information from. That is, a record keeper will have starkly different capabilities and service offerings than a consultant or TPA. The questions directed at a record keeper might be more “capability” oriented in nature, where an adviser’s questions may be more philosophical and experiential. Understanding the role of the service provider in question will help to direct questions in a way that gives the most actionable information possible. Always remember one of the golden rules of writing: Know your audience.

Ultimately, a good RFP questionnaire is dependent on a plan sponsor understanding the unique needs and challenges of the plan they are charged with operating. However, a broad understanding of the retirement plan industry is necessary, too. Understand if the plan needs a service provider to take on a fiduciary role, what sort of investment options are available, the different ways to fund plan expenses and how they fit into a provider’s capabilities — the list could go on for a while. As these questions mount, sometimes even the simplest of RFPs can be bogged down by their own weight.

Also see: "5 retirement resolutions for the future."

Don’t be afraid to seek outside help with the RFP project. An outside consultant experienced in RFP work can make the entire project more effective and rewarding for the organization. Approach the process with patience and formula, and allow for sufficient time for all stages of the process, from writing to responding. And as always, work with the end goal in mind.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does adviser assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.


Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

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