Evaluating Your Plan’s Recordkeeper

Your fiduciary responsibility to your plan participants includes periodically evaluating your plan’s recordkeeper to ensure their processes facilitate the correct execution and reporting of transactions, adherence to federal and state regulations, in addition to the reasonableness of fees in relation with the quality of services provided. With that said, it is important to periodically assess your current recordkeeper. Learn more about the role a plan recordkeeper plays and some of the factors plan sponsors should consider when choosing and evaluating a recordkeeper.

What a Recordkeeper Does (and Doesn’t Do)

A plan recordkeeper tracks the who, what, where, and how of a retirement plan:

• Whois in the plan;
• Whatmoney is flowing in and out of the plan;
• Where the plan’s assets are kept; and
• How investments are allocated.

Just a few of the tasks a recordkeeper typically handles are:

• Processing employee enrollment in retirement plan(s);
• Tracking employee investments in the plan(s);
• Disbursing and administering plan loans and hardship withdrawals; and
• Issuing account statements and retirement income projections.

Though they do offer customer support, recordkeepers do not provide advice or investment guidance to plan participants (unless specifically offered and contracted to provide with the participants). Recordkeepers do not usually serve in a fiduciary capacity.

Evaluation Factors in Choosing and Retaining a Recordkeeper

When choosing from among multiple recordkeeping candidates, it can be helpful to evaluate each candidate in four main areas:

Experience

Inexperience does not necessarily translate into poor performance. However, your plan is especially vulnerable to costly slips or missteps. Choosing a plan recordkeeper with extensive experience in working with plans of your size and type can help smooth this path and provide your plan with the room it needs to grow.

When you are evaluating prospective recordkeepers, you will want to know as many details as possible about their business history. What sizes and types of plans have they managed? How have they dealt with difficult economic circumstances or complicated reporting requirements? The answers to these questions can give you a better idea of which recordkeeper has the experience most relevant to your company.

Services

Recordkeepers can offer all-inclusive (or “bundled”) service arrangements or unbundled arrangements. There’s no one-size-fits-all solution for plan sponsors, and the right choice for your organization will largely depend on how much control you would like over your retirement plan.

• Bundled service arrangements utilize a single recordkeeping provider to handle all your recordkeeping tasks for administrative ease, and perhaps cost savings.
• Unbundled service arrangements use a number of different service providers, providing plan sponsors with more flexibility, as well as greater complexity in oversight.

There are pros and cons to both arrangements. Bundled services can be simpler and more streamlined, ideal for busy plan sponsors that do not have the time to vet multiple additional vendors, and can often be more cost-effective. Unbundled services allow for more specialization and flexibility in choosing services.

Technology

If your retirement plan website is confusing or hard to navigate, you are doing your employees a disservice. The more user-friendly this site is (and the more interactive tools it has to provide users with a window into their retirement), the more likely your employees are to use it.

There is no better way to evaluate a recordkeeper’s technology than by simply trying it out. Visit the recordkeeper’s website and browse around. Download any recordkeeping apps to ensure that they work on your mobile platform.

Fees

It can be hard to know where your plan falls on the fee spectrum without performing some form of fee benchmarking and/or receiving proposals from several different vendors. Always get a customized quote; not only will this help you avoid paying for services you do not need, but it can also ensure you are comparing apples to apples. If certain services are offered as optional or one-time transactions, get the prices for these services as well. Depending on how often you need these services and how much they cost, it could be worth paying a slightly higher base rate in exchange for cheaper “extras” that add up. In addition, it is important for plan fiduciaries to periodically review pricing – what was once considered “reasonable” could evolve into being excessive.

We Provide Expert Help

By keeping this four-factor framework in mind, you will be in a strong position in evaluating a recordkeeper or to find the right recordkeeper for your plan. Do not be afraid to ask tough questions of any prospective candidates; in today’s turbulent market, doing your due diligence as a plan sponsor has gained new importance.

Do you need help evaluating your current recordkeeper or do you think you should look for a new provider? Let PlanPILOT help. As an independent Registered Investment Advisor, PlanPILOT is not tied to any recordkeeper. We offer clients unbiased advice and assistance to control their retirement plan risks and deliver benefits effectively. Call us today at (312) 973-4911 or email info@planpilot.com to see how we can leverage our vast experience to find the best fit for your plan and its participants.

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