Q: We are thinking about submitting a request for proposal to several recordkeepers for due diligence purposes. Besides the traditional questions, do you have any guidance on issues we should focus on?
A: Fifty-eight percent of sponsors surveyed for the 2021 PLANSPONSOR Defined Contribution (DC) Plan Benchmarking Report said their organization has been using its DC plan recordkeeper for more than seven years, so the timing may be right for sponsors to take a fresh look at the recordkeeping marketplace. Here are some key issues you may want to focus on, depending on what is most important to you and your employees:
Mergers, acquisitions and outsourcing of services by recordkeepers continues at a fairly high pace, so you need to understand who is committed to the business and who is outsourcing or leaving that business — and how does that impact their service model?
Many recordkeepers now offer 360-degree payroll integration, transmitting data directly from the recordkeeper’s system to the payroll provider’s without the employer having to touch it. This may be something to ask about, as it creates efficiencies and is also an opportunity to reduce errors (which helps protect you from a fiduciary standpoint).
You may also want to identify which recordkeepers can incorporate add-ons such as financial wellness platforms to participant websites, as well as integration of programs for emergency savings, student loan repayments and health savings accounts.
It’s important to go beyond asking about the basics of what a recordkeeper does to prevent cyberattacks. Consider identifying recordkeepers who offer a guarantee to reimburse a participant if there is a loss, and ask what those guarantees entail.
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For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.
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©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
