University of Kentucky

The University of Kentucky had for years handled its recordkeeping deals by renegotiation, not a formal request for proposals process. But by 2017, plan officials determined that it made sense to do an RFP.

“We decided that we needed to establish a baseline RFP, from a fiduciary standpoint,” says Richard Amos, the chief benefits officer who started at the Lexington, Kentucky university in August 2016. The university’s plans aren’t ERISA plans, but the plan committee utilizes fiduciary standards to oversee them.

The plan committee worked on the RFP process in 2018 and early 2019, before deciding in 2019 to keep longtime vendors Fidelity and TIAA. “We wanted to justify and document, would it be best to stay with the two vendors? Should we go to one? Or should we go to another vendor?” Amos says. Both Fidelity and TIAA service all of the university’s retirement plans, and participants have a choice of the two.

“With the RFP, we didn’t feel that there were inefficiencies, but we felt that there was always room for improvement,” Benefits Manager Gail Carbol says. The plan committee especially wanted to see if they could lower fees further, she adds.

The University of Kentucky did participant focus groups and surveys as it went through the RFP process. “We gauged participant loyalty to the vendors, and we learned that having both vendors was really important to participants,” Amos says. “The plan committee spoke about how the satisfaction level with both vendors was high, and there was a strong belief among the committee members that having two vendors was still within the realm of best practices. In a sense, they make each other work hard to keep our business.”

After going through the RFP process, plan officials worked with the recordkeepers in 2020 and 2021 on streamlining the investment lineups. With Fidelity, the fund lineup got consolidated from more than 200 options down to 22, and concentrating assets in fewer investments helped reduce the weighted average investment expense ratio by 60%. With TIAA, the university consolidated the lineup from 54 investments down to 31 options, and the weighted average investment expense ratio dropped by 18%.

“For the most part, the investment options we eliminated were similar investments in the same asset class, and we were able to offer one best-in-class option in that asset class,” Carbol says. “We mapped participants’ assets over to the similar investments.” Virtually all existing investments not retained in the core lineup are available in the self-directed brokerage window added to the 401(a) and 403(b) plans in tandem with the streamlining. About 5% to 10% of participants utilize the brokerage window.

The university also transitioned in March 2021 to a per-participant administrative fee for its retirement plans, which played a part in total plan costs declining by an average of 26% for participants with TIAA and 39% for participants with Fidelity. The university’s plans previously paid for administrative fees primarily through revenue sharing, but now all participants pay an administrative fee equal to six basis points, based on the assets in their account. “It’s transparent, and it’s equitable,” Amos says. “We wanted the fee to be known by participants.”

–Judy Ward