Issues Regarding the Selection of Service Providers

November 5, 2012 ( – Retirement plan service providers should look at plan sponsors both as employers and business owners.

Virginia Krieger Sutton of VKS Consulting told attendees of the American Society of Pension Professionals & Actuaries’ (ASPPA’s) Annual Conference that not only are plan sponsors employers looking for good benefits for employees, but they are also business owners seeking tax benefits, cost savings and internal success. Service providers should meet both these needs. 

According to Sutton, employers evaluate their retirement plans as comprehensive programs; they should be aligned with company goals, recordkeeping and compliance should not be too costly or complex, and they should provide helpful communications and the best retirement savings vehicles for employees  

One service that is important to sponsors is a website that allows them to find plan metrics easily, run queries and make some changes, such as enrollments and beneficiary designations, online, Sutton contended. Service providers should leverage technology to improve processes for plan sponsors. Enhanced features could include loan modeling and transaction-based downloading to money management software.  

However, technology can also be very important for plan sponsors’ desire to offer a strong benefit to employees. Can the service provider engage employees online? Do calculators or models include retirement health care needs? Sutton said plan sponsors may look to provider offerings as the total financial fitness “hub” for employees.

Fees can depend on many things: number of participants, amount of assets, services provided and technology used. Service providers can show plan sponsors how they can save the sponsor's money. As an example, Sutton noted that proprietary recordkeeping systems are typically expensive, but a partnership with a software provider may be less expensive for plan sponsors. She added that providers can promote their partnerships as a way to stand out to plan sponsors.  

The most appropriate pricing depends on the plan and can change over time. Sutton suggested that asset-based pricing may be best for smaller plans at first, if minimum fees are cost prohibitive, but these plans can shift to a different fee structure as assets grow.  

Sutton shared some services plan sponsors will compare and rate relative to their priorities: 

  • Type of program – full-service/bundled or TPA/recordkeeper partnership; 
  • Size of service provider – number of plans, average plan, number of plans handled by service team, single or team point of contact; 
  • Range of investments and ability to access accounts; 
  • Technology – Web and phone access, for both employee and employer; 
  • Education program – depth of materials and availability in other languages; and 
  • Compliance – not just service, but willingness and ability to educate employer. 


Sponsors may also want to know:  

  • How quickly will the recordkeeping invest/allocate employee deferrals? 
  • Is an institutional trustee mandatory? 
  • Are there incidental charges for frequency of payroll transmittals, mail, hardship, loan or QDRO transactions? 
  • Who is responsible to solve problems? 
  • What happens if the plan must terminate?