The Bottom Line | Published in June 2012

Which One Is Best?

Five ways to select the best service provider   

By Corie Russell | June 2012
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Illustration by Nathan Huang

For a plan sponsor, selecting or changing a service provider can be daunting and may very well be the most crucial choice made as a plan fiduciary. A good provider can help prepare participants for retirement by supplying quality tools, education and investment options. A bad provider, on the other hand, has the power to ruin a company’s retirement plan.  And, to make things more complicated, according to the Department of Labor (DOL), a plan sponsor has a fiduciary duty to “establish and follow a formal review process at reasonable intervals” to ensure the selected provider is appropriate for that company’s retirement plan.

So where to begin? “The whole process has to start with figuring out and being very honest about the most important aspects of the plan—[and] what the most important aspects are to the client,” says Stace Hilbrant, managing director of 401k Advisors LLC.

The decision, ultimately, is in the hands of the plan sponsor, but help exists—many plan sponsors call upon the plan’s adviser or engage an outside consultant to help guide him through the process. The adviser or consultant can work with the sponsor to determine goals for selecting a provider or establish what does not work with the current one. The adviser must then determine which provider fits the sponsor’s goals or resolves its current issues. For example, a sponsor might be most interested in low-cost investments or participant education. In one case, Hilbrant says, he performed a provider search for an employer with 100 locations and eliminated the vendors who could not adequately support them all.   

In a nutshell, the adviser’s job is to run the provider search, notify providers that do and do not make the cut, and lead the finalists’ meetings, as well as answer any questions about the search, Hilbrant says.