PSNC 2017: Improving Your Plan Through the RFP Process

The time for evaluating a provider can also be opportune for revisiting services, fees and investment options.

Employees of the University of Massachusetts (UMass) have a choice to participate in either the Commonwealth of Massachusetts defined benefit (DB) plan or a 401(a) plan. While either is a good start toward retirement savings success, UMass, a five-campus public university system, realized that more saving was needed.

State-sponsored 403(b) plans are exempt from the Employee Retirement Income Security Act (ERISA); however, UMass decided that following the act’s best practices was right for its plan—especially if the school hoped to improve participation and success measures, its target income replacement rate being 80%.

Andrew Russell, assistant vice president for the UMass System’s office of human resources (HR), in Shrewsbury, Massachusetts, addressed attendees at the 2017 PLANSPONSOR National Conference last week in Washington, D.C., about how, in keeping with ERISA, the system streamlined its 403(b) plan through the request for proposals (RFP) process.

Up until the passage and effective date of the final 403(b) regulations, in 2007, participants at UMass had 50 recordkeepers to choose from. According to Russell, “We put out an RFP to consolidate recordkeepers, complying with the new regulations and updating the plan structure.” The plan went from 50 recordkeepers to six.

A few years back, also by soliciting RFPs, UMass selected Cammack Retirement Group in Wellesley, Massachusetts, as its adviser/consultant. At the time, UMass wanted help building a 403(b) plan road map. “Looking for an adviser through an RFP was something we weren’t familiar with,” Russell recalled.

The system started by talking to its carriers and providers, peers, and other higher education institutions “to learn which firms were out there,” he said. “We used different industry resources, such as PLANSPONSOR, but you can learn so much from the [RFP] documents. Then you have to look at which providers stand out most. It’s not until the interview that you usually find out how they work, how their team would work with your team.”




Last May, with Cammack’s help, the university further streamlined its plan, reducing recordkeeper providers to two.

How did UMass know whom to invite to the RFP? Russell said, “We had to do our homework and, for each RFP, use different resources. We knew lots of recordkeepers from our past relationships, so that was pretty straightforward for us.”

Choosing an adviser is a little different, suggested panelist Michelle Rappa, head of DCIO [defined contribution investment only] marketing for investment manager Neuberger Berman. “Plan sponsors dislike this process because their current adviser can’t help them,” she pointed out. “We try to give them resources and questions to ask possible advisers and help them identify the services they require.”

When it comes to choosing a provider, the adviser has a role, she said. “When a plan sponsor decides to go forward with an RFP, the adviser should be [involved]. Using an RFP is part of the fiduciary process, so finding the right provider through a competitive process is essential. It helps with governance, from the start. It also helps the adviser to set goals and expectations, and the plan sponsor to confirm what services it will receive.”

An attendee asked Russell if putting a current provider through the RFP process is awkward, and “Is that a signal [UMass’s] business is up for grabs?”

“As we are a public plan, providers understand that we need to go through the competitive process,” Russell explained. “So for us it has not been an issue, and the providers we work with are very accustomed to this.”

From the investment manager perspective, Rappa concurred that this is typical of all public plans. As to the investment adviser side, she said, “We encourage advisers to get their plan sponsors to go through the RFP process, to make sure the sponsors and advisers are keeping their governance in check. Everyone gets on the same page, and it’s a good provider review.”

Sometimes, though, the entire process may not be necessary—for example, Rappa said, “for plan sponsors that have worked with us before or that are existing clients, as they understand our organization and have already asked the legal questions. Other plan sponsors that are a little more sophisticated just come in with due diligence questionnaires, updates on the things they need to know versus a full-blown RFP, which may give them more information than they need.”

How many plan sponsors come to the table to improve the plan vs. simply perform the due diligence? “I think sponsors and advisers approach RFPs from both sides, but they’re really necessary if you’re looking for strong governance. You should have a procedure whereby you know that, at certain time intervals, you will go back and just be sure—even if you’re happy—that everything is going well and you’ve done the vetting, and you know that the services you have are competitive.”

Things do change, she continued, so it’s not a bad idea to confirm that the prices you pay for the services you receive are still valid. Doing so will help protect the plan sponsor as a fiduciary.

Additionally, she said, “Technology is speeding up the RFP process. Most of it is done electronically and delivered electronically. There are still requests for paper submissions, but most plan sponsors and providers prefer electronic RFPs. Searching through the spreadsheet electronically, on the receiving end, for the plan sponsor is much easier.”

Russell said, “In the last five years, we’ve done three RFPs, so we’ve been very much in the space. As we’ve matured as an organization, our RFP process has matured. Using the expertise of our adviser and our recordkeepers, we came out of this process well.”