How to shop for retirement plan providers

Here are tips for how to shop for a new retirement plan vendor. It’s really important to recognize that you need to choose well so your participants are happy and so you’re happy administering the plan. After all, this is a benefit. And, since you’re responsible for handling other people’s money, this isn’t a decision to be taken lightly.

Do use a formalized RFP process and solicit several bids that represent a cross-section of the industry. This will save you time and help to compare vendors to each other in a way that will help you weigh what reasonable fees are while also showing you a cross section of the market. In fact, PlanSponsor Magazine has a great article about it here.

Conduct several rounds of interviews. Especially if you’re going through the process alone, you will learn more as you hear a vendor’s pitch or see proposals. Make notes of all the features and programs that they claim are exclusively theirs, items you like best or find intriguing, and go back to the rest of the group and ask what they have (assuming you actually want that “thing”). If you don’t, you’ll be making the mistake of comparing apples to oranges and assuming one is superior. Each vendor may have a different approach to your plan with different reasoning.

Challenge their sales-y statements. Sometimes the statistics that vendors boast sound really great but they really don't mean much. For example:

We have the most 403b plans of any vendor.

Why is that? Is it because the 403b market isn’t very large, doesn’t have as much competition as 401k, they bought a bunch of other providers, because they actually offer something superior? Is it “good” that they have the most of those types of plans?

When suffering through sales presentations, don’t be afraid to ask what it means to you. Good salespeople know that the buyer doesn’t care about anything except how it fits in their situation or makes their life better. Bad ones just keep talking. If you can’t tell why something is so spectacular, ask why you should care.

This outlines the basics of shopping for a new plan provider, and there are more tips that we could offer, but hopefully this will help steer you to buy the best-tasting steak and not just the sizzle!  As always, if you’re looking for additional help on this topic, drop us a line on the Contact Us page. We've also got a great white paper on this topic on evaluating the success of your plan, learning how to evaluate your must-haves, and determining your vendor questions.