Administration May 1, 2023

How Technology Has Transformed the RFP Process

When searching for a new recordkeeper or adviser, plan sponsors can take advantage of new technology tools to help streamline the RFP process and avoid the administrative headache.
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Art by Janik Soellner

For many plan sponsors, conducting a request for proposals to find a new recordkeeper or adviser can be a daunting task—from both time-consuming and administrative burden standpoints.

But with the proliferation of new technology tools and providers, the RFP process can be streamlined and become much less painful for plan sponsors.

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V Chandrasekaran, director and co-founder of Congruent Solutions, a pension administration software provider, said the retirement plan industry is experiencing a “remarkable transformation due to rapid technological advancements,” and embracing these trends will empower plan administrators and recordkeepers to optimize services.

“Automation and digital tools can help reduce administrative costs, save time and energy, streamline processes, improve accuracy, and maximize operational efficiencies,” Chandrasekaran said in an emailed statement. “Furthermore, with the advancements in data analytics and [artificial intelligence]-driven operations, businesses can gain deeper insight into industry needs and monitor their plan’s performance more effectively.”

Embrace Technology, With a Grain of Salt

At the same time, Jim Scheinberg, managing partner at North Pier Search Consulting, says it is important for plan sponsors to remember that “technology is a tool, and not necessarily an outcome.”

At North Pier Search Consulting, where the firm runs hundreds of RFPs and searches for recordkeepers, advisers and OCIOs, Scheinberg says the firm is well-equipped to use various technology platforms because the firm is already “heavily armed” with research about various recordkeepers and advisers, and it is able to interpret the data these platforms produce.

For plan sponsors looking to take advantage of new tech tools coming on the market, Scheinberg says they need to be careful about falling into marketing traps.

“If you put an electronic RFP tool in the hands of an organization that doesn’t know how to interpret the information that’s coming out the other side, you could end up succumbing to market spin,” Scheinberg says. “The tool itself is much better than doing it by hand on spreadsheets, and [having] piles of written proposals sitting on desks can be heavily inefficient. But this is a case where replacing wisdom and experience with technology probably, more often than not, is going to lead to a nonoptimal outcome.”

Conducting a Diligent RFP Process

Scheinberg says plans of all sizes receive dozens of calls every month trying to get them to change providers. This constant marketing can “shake a plan sponsor’s confidence” in its current team of providers. According to Scheinberg, this emphasizes the importance of conducting a diligent RFP process.

“The RFP can be the great equalizer in that equation,” Scheinberg says.

He recommends that plan sponsors create a regimented process by deciding, for example, to go to market every five years for recordkeeping services and every seven years for adviser services. This internal policy addresses three issues:

“The regulators see a process that’s thought-out; the litigators have a well-documented evidence trail,  so you can show you had procedural prudence; and you can push back at some of the vultures at the gate that are constantly trying to get your attention, and [you can] say, ‘Hey, we’re running an RFP routinely, and our next one up is in 2025. We’re happy to send it to you if you want to reply to it,’” Scheinberg explains. “It creates more of a regimented process instead of a reactive process.”

Plan sponsors have a regulatory duty to oversee their service providers, and Scheinberg says this responsibility was heightened by the passage of 408(b)(2) regulations by the Department of Labor in 2012. Under the law, covered service providers must provide plan fiduciaries with appropriate disclosures about services being performed and their costs.

In Scheinberg says lawyers typically say an RFP should be conducted every three to five years, and the majority of plaintiffs in ERISA litigation cases allege that RFPs should have been conducted when fees were being contemplated. But others have a more pragmatic view and say that the three-to-five-year window is too restrictive for medium and smaller-sized organizations that do not have the resources to conduct an RFP so frequently.

Scheinberg says the larger the organization, the more frequently an RFP is necessary.

New Technology Providers Enter the Market

In order to speed up the RFP process for plan sponsors, several technology platforms have entered the market, offering a variety of features that include side-by-side recordkeeping fee comparisons and pre-written templates with industry questions.

InHub LLC, an RFP and due diligence questionnaire software platform acquired by RFPIO last year, allows plan sponsors to digitize their RFPs, create a template with industry-standard questions, add their own questions or build an RFP completely from scratch.

“[InHub] allows issuers to seamlessly distribute requests and questionnaires to select candidates, more easily collaborate across teams, and centralize data gathering and review processes,” said Ariana Amplo, founder of InHub and vice president of services at RFPIO, in an emailed statement. “Our solution also offers tools to score, note take, vote on and evaluate requests.”

Amplo argued that without platforms like InHub, issuers can struggle to keep documents and communications organized, to stay up to date with changing contacts and to meet RFP deadlines.

“If the process is unorganized or candidates believe it is not a ‘serious’ RFP, they will frequently decline participation, won’t know which questions to ask or how to even begin,” Amplo said. “Poor admin[istration] and poor evaluation can not only delay an important project but can actually change the outcome.”

Amplo added that high-value RFPs that involve several department heads and internal stakeholders, such as those related to 401(k)s, can be even more challenging to keep organized.

InHub requires a one-time technology fee for plan sponsor users, with additional packages available for organizations that require more assistance or access to additional tools and services.

“I think that giving plan sponsors and investment committees a tool that helps them run just one critical RFP can save them hundreds of thousands of dollars,” Amplo said. “It helps them get to and through the RFP process in an organized, timely manner instead of putting it off another quarter, which so easily turns into another year. It can also deliver savings in the form of better pricing, fewer legal fees and bad outcomes in a DOL audit by helping them hire a qualified winner that can better guide them in the next phase of the retirement plan.”

Founded in 2018, Benetic Inc. is another RFP and request for information platform that works directly with plan advisers to benchmark plan services and fees, as well as search for new providers based on the services that their plan sponsors need.

The platform currently has live pricing for 21 recordkeepers and does custom pricing requests for another 25 recordkeepers. This provides advisers access to instant and real-time price comparisons.

“The adviser goes [on Benetic] and says, ‘These are the five recordkeepers I want to compare, and here are the requirements I’m looking for,’” explains Kristin McCarthy, senior vice president of product and client experience at Benetic. “Our platform takes all the pertinent information [from the recordkeepers] and does an apples-to-apples comparison. We put it into a nice, little, neat package that is easy to understand and explain to the plan sponsor.”

Advisers can also get quotes from recordkeepers that are not within the system, but those require a longer turnaround. Recordkeepers that decide to participate in Benetic’s platform are able to determine how they want to display their pricing, according to CEO Ray Conley.

McCarthy says Benetic’s basic services are offered at no cost to the plan adviser, but there are add-ons, such as requesting an in-depth historical benchmark, that will come at a cost.

“These technologies are just making it easier to find what you need to narrow your search very quickly,” McCarthy says. “It allows the advisers more time to meet with the plan participants and the plan sponsors and help educate them, as opposed to doing all the technical back work.”

Streamlined RFP Benefits Everyone Involved

Scheinberg says technology tools are helpful if a plan sponsor wants to conduct the RFP process solo, but it’s “only going to get them so far.” He recommends working with a dedicated search consultant, like North Pier, to alleviate much of the administrative burden.

RFPs also create work for the respondent organizations, and Scheinberg says recordkeepers and advisers are less likely to respond to an RFP if they are required to craft new answers for each request.

“Having a streamlined, electronic RFP tool can create some synergies on the respondent side, as well as on the operator’s side, whether that be the plan sponsor or search consultant,” Scheinberg says.

Amplo believes a diligent RFP process greatly benefits plan participants as well.

“I think when you zoom out and look at how this helps plan participants indirectly, it’s enormous,” Amplo said. “It helps their employers run a competitive bid process to ensure a qualified adviser with market-competitive fees is working with them to oversee the plan, investments, recordkeeper and participant education programs.  Without that, participant balances could be down significantly come retirement due to lack of education on contribution recommendations or in poor performance.”

Administration April 19, 2023

Plan Sponsors Have Lots to Prep for SECURE 2.0 Compliance

Whether legislated changes take effect now or down the road, communication with recordkeepers and participants will be crucial.
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The sheer size of the SECURE 2.0 Act of 2022, which has more than 90 provisions impacting workplace retirement plans, can make compliance feel overwhelming for many plan sponsors. But those provisions go into effect over a 10-year period, and most of them are optional, rather than mandatory, so the task of updating plan design to comply may be more manageable than they expect.

 

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“It’s important that plan sponsors and their advisers work closely with their recordkeepers and providers to identify new features that might work well for their plan and a course of action for adopting them,” says Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies in Cedar Rapids, Iowa. “Plan sponsors should inquire about the cost implications of any new compliance requirements or adoption of new features, as well as the ongoing costs.”

 

The biggest mandatory change for 2024 is a new requirement that catch-up contributions by high-income earners (50-year-olds making $145,000 or more) must be made into a Roth account. That means that those plan sponsors who do not currently offer a Roth to employees must either eliminate their catch-up provision or put a Roth option in place, at least for high earners.

 

On a practical level, industry experts say that most sponsors are choosing the latter, opting to make a Roth available for all participants.

 

“I don’t imagine that many recordkeepers are going to be thrilled at the idea of just building out a Roth program just for catch-ups,” says Elizabeth Dold, a principal in Groom Law Group. “I anticipate they will strongly encourage folks to adopt the Roth 401(k) feature first.”

 

RMD changes

Other mandatory changes that plans must put in place for next year center around required minimum distributions:

  • Surviving spouses can elect to be treated as their deceased partner for the purposes of RMDs.
  • There is no longer an RMD requirement for living participants in employer-based Roth plans

 

Plan sponsors and advisers should be speaking now with their recordkeepers now to find out what they are doing to keep plans compliant for 2024—and what new features or options might be available to them as more optional provisions come into effect over the next few years.

 

“Plan sponsors can ask recordkeepers for a summary of the SECURE Act 2.0 provisions that will affect their plan and what the recordkeepers’ plan of actions is to address them,” says Chad Parks, founder of Ubiquity Retirement + Savings, a 401(k) provider specializing in small businesses. “It could be as simple as a one-pager, but as a plan sponsor, you have the fiduciary responsibility to make sure you’re complying with all of the laws.”

 

Amy Vaillancourt, senior vice president for workplace architecture at Voya Financial in Windsor, Connecticut, says her company is regularly having such conversations with plan sponsor clients about how and when they’re planning to update their system.

 

“There’s a focus, first on those things that are mandatory, but I believe that as we get into 2024, people’s attention will turn more toward things like emergency savings and the things that are a little bit more financial wellness-type things,” Vaillancourt says.

 

In addition to connecting with their recordkeepers, plan sponsors likely also need to be thinking about how to update communication with participants to make them aware of changes.

 

Optional provisions

There are also a handful of optional provisions that will go into effect next year, but employers can take their time evaluating if these make sense for their plan and the best way to implement them. These include:

 

  • Self-certification for emergency saving withdrawals of up to $1,000 per year and for domestic abuse withdrawals (penalty-free);
  • Employer contributions to a retirement account matching employee student loan payments;
  • After separation, employers can roll over participant balances of $1,000 to $7,000 into an Individual Retirement Account;
  • Introduction of automatic portability of accounts; and
  • Automatic deposits into an emergency savings account, up to 3% of salary for a total contribution of $2,500.

 

“This is a great opportunity for committee members to take a step back and ask whether their plan is the way the that they want it to look,” says Dawn McPherson, director of retirement plan consulting at CAPTRUST. “Start with those internal conversations about employee needs, and what are the changes that you have been wanting to take action on?”

 

McPherson suggests that plan sponsors and their advisers make a plan for which optional parts of SECURE 2.0 they want to prioritize and then start talking to their providers this summer to put a timeline in place for implementation.

 

“Talk to your recordkeeper; if you have a third-party administrator, talk to them,” she says. “Your payroll provider will be key, and outside counsel will be critical at various stages, too.”

Even plan sponsors who want to put these provisions in place as soon as possible may need to wait to see if recordkeepers have built out the new products and systems required. In some cases, plan sponsors and recordkeepers are also waiting for guidance on administration and execution from the Department of Labor.

 

“There are so many questions that plan sponsors can start asking to make their providers aware that they are even interested in the optional provisions,” McPherson says. “Then they need to find out what their recordkeepers are doing to prepare.”

 

Already, some plan sponsors are having to weigh some of the knock-on effects of implementing optional initiatives. For example, a 2023 optional provision allowed plan sponsors to start making their employer matching or non-elective contributions into a Roth. However, taking advantage of this meant not only that they had to have a Roth option in their plan, but also that they needed to make the contributions vest immediately, given the tax treatment of the Roth.

 

“It causes plan sponsors to make sure that the changes have been made to eliminate the vesting structure or to look at the structure around the availability of Roth matching and nonelective contributions in a way that allows for it,” says Rob Woytassek, Alerus’ director of retirement and benefits. “Some of the talk I’ve heard is that plan sponsors or recordkeepers might look at it as the participant needs to meet the plan’s vesting schedule before they can have the contributions in a Roth.”

 

Coordinating With Providers

Many of the updates required for these provisions build on the core provisions that recordkeepers already have in place, says Vaillancourt, so she does not expect much of an impact on pricing. But the impact on payroll may be larger than that of other recent legislation, she adds.

 

“Absent the cost piece, the coordination between the employer, the adviser, the recordkeeper and the payroll company is going to need to be very aligned,” Vaillancourt says.

 

Looking ahead to 2025, one of the most important mandatory provisions employers will need to prepare for is providing plan coverage to long-term, part-time (LTPT) workers. While employers can begin thinking about it now, more guidance is needed, specifically in how to determine eligibility for workers whose hours vary from year to year.

 

Plan sponsors who do alter their plan design as a result of SECURE 2.0 have some breathing room as far as updating plan documents to reflect the changes.

 

“You don’t need to worry about plan amendments yet,” Groom’s Dold says. “Amendments aren’t needed until 2025. But we need to be in operational compliance, either immediately if the change is in effect this year, or if it’s a change for next year, that’s fast approaching.”

 

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