Consultants often help companies clarify those needs by, as Katz says, “knocking providers off the list as we learn more about a client’s needs.” Getting to a short list fast is the main reason companies use consultants; relying on someone else to issue and evaluate RFPs is a close second. But for some companies, especially newly created companies, having someone in-house who really understands 401(k) and related issues can be a huge asset.
That’s what Bruce Mullen decided, anyway. Last May, he found himself ensconced as treasurer in the newly created Vantico Inc., a Brewster, New York-based manufacturer of adhesives, coatings, and related products that had just been spun off from Ciba Specialty Chemicals. The company’s pension and 401(k) plans were managed separately, and Mullen wondered if that would pose a compliance issue down the road. After attending a midsize pension management conference last fall, he decided to solicit bids from eight providers that might be able to handle both the defined-contribution (DC) and defined-benefit (DB) portions of Vantico’s retirement plan. He put together a 20-page RFP, narrowed the six companies that responded down to three, and paid site visits to each so he could get a feel for their operations.
All three were very close, he says, and any one of them probably would have worked fine. What helped him sort through all the options was knowing what was most important to him — in this case, the ability to bundle DC and DB services into a single offering. “By comparing notes with other conference attendees,” Mullen says, “I saw that we, in fact, offer a very good retirement program. I wanted to find a provider that could showcase that, that could do things like let our employees do Web-based financial modeling and take into account both their pension and their 401(k) plan. So bundling was crucial.”
Once a company has decided which plan features matter most, a very important next step is to sort out fees, says Liz Weber, principal and mid-Atlantic partner in charge in the compensation and benefits practice of KPMG. Companies vary greatly in this regard, and scrutinizing RFPs or sample contracts is imperative. “Ask your candidates to be specific about which services are covered for the estimated fees and which aren’t,” says Weber. “Some companies charge extra for hardship withdrawals and loans.” Related to that are administrative issues. For example, some have call centers that can process loan requests, while others leave this task to a client’s HR department. “If you have a sizable percentage of employees with loans at any one time,” says Barra RogersCasey’s Katz, “that can be a huge issue.”
Both Weber and Katz use a matrix so that potential 401(k) plan providers can be evaluated on an apples-to-apples basis, and both strongly recommend a site visit to the finalists. In fact, Katz says that by the time a client has narrowed the choice to two or three companies, the differences are often so minimal that the site visit will actually determine the winner.