WHAT PROCESS SHOULD BE USED TO EVALUATE A PLAN RECORDKEEPER ?
Under DOL guidance , a reasoned decision-making process should involve the fiduciaries gathering relevant information , consulting experts as necessary , and evaluating all available courses of action . 5
An RFP process is a common means of obtaining relevant information . Undertaking an RFP process on a periodic basis may provide plan fiduciaries with evidence that the terms of the plan ’ s recordkeeping arrangement were , in fact , the best terms that could have been reasonably negotiated by the plan . In this regard , numerous lawsuits filed against plan fiduciaries have alleged that the plan fiduciaries permitted excessive compensation to be paid to the plan ’ s recordkeeper because the plan fiduciaries failed to undertake a periodic RFP process . 6
However , it is important to note that an RFP process is not legally required . 7 This is because an RFP process is not the only means of obtaining relevant information . In some circumstances , an alternative means of obtaining relevant information may be preferable to an RFP process and its associated costs . For example , in a settlement of an ERISA plan fee litigation , the plan fiduciaries agreed to retain an independent consultant to advise on whether undertaking an RFP process would make sense but did not commit to undertaking an RFP process . 8
In many situations , particularly for smaller plans , it may make sense for plan fiduciaries to obtain relevant information through an RFI or benchmarking process . An advisor , consultant , or a third-party administrator with a good understanding of the capabilities and fee ranges of various recordkeepers could provide valuable assistance . What is important is that the plan fiduciaries ( with or without the assistance of a third-party ) evaluate the pros and cons of potential recordkeepers ’ services packages and fees . In all events , plan fiduciaries should consider relevant facts , such as the following , for a proposed recordkeeper :
THINGS TO CONSIDER
• The recordkeeper ’ s reputation in the market place and experience providing services to plans of similar size and needs ;
• Available fee arrangements ( including how revenue sharing payments from investment options could be used by the plan );
• Available scope and quality of services ;
• Amounts and types of fees charged for services ( including what services are included in the base price and what services are provided at extra cost );
• The terms of the recordkeeping contract ( including limitation of liability , indemnity , data security , participant advice , etc .);
• Potential conflicts of interest ; and
• Litigation or enforcement actions involving the recordkeeper .
5
DOL Field Assistance Bulletin 2003-02 ( Nov . 22 , 2003 ).
6
See , e . g ., Krueger v . Ameriprise Fin ., Inc ., 304 F . R . D . 559 , 564 ( D . Minn . 2014 ) ( noting that “ Plaintiffs contend that Defendants failed to negotiate a reasonable record-keeping fee or put the Plan ’ s services up for competitive bidding , thereby causing the Plan to pay unreasonable recordkeeping fees ”).
7
See , e . g ., White v . Chevron Corp ., 2016 WL 4503808 ( N . D . Cal . Aug . 29 , 2016 ); Troudt v . Oracle Corp ., 2019 WL 1006019 ( D . Colo . Mar . 1 , 2019 ).
8
See Clark v . Duke University , Case No . 1:16-cv-01044 ( M . D . N . C .) ( settlement agreement available at : https :// duke403bsettlement . com ).
2