That advice came from prominent plan advisor Dorann Cafaro, president of The Cafaro Group, during a series of discussion groups at the PLANSPONSOR Plan Designs 2006 conference held at a Chicago hotel.
In order to know whether a plan would be best serviced by a single provider versus on an a la carte basis, Cafaro told conference attendees they need to better understand their current cost structure and that means understanding the role of every person who touches the plan along the way. Armed with the resulting in-depth cost analysis that includes the roles of accountants, actuaries, tax advisors, and others, Cafaro asserted, the sponsors can then negotiate potentially significant expense savings from a new TRO provider.
Dwight Kadar, former director of investments at Cooper Industries and a fellow panel member with Cafaro, told the group that he had gone through the exact process Cafaro described with his old employer. “All of a sudden,” Kadar remembered, “it became a much bigger project that we had thought.”
Both Cafaro and Kadar hit hard on the important company role payroll experts can play in getting clean regular payroll data to the vendor in the appropriate data format – particularly in legacy companies that may be laboring under a large number of payroll systems, which they may have acquired along the way through M&A deals. As an example, Kadar said Cooper was dealing with nine payroll systems.
Kadar told attendees that Cooper was ultimately able to bundle a cash balance plan, 401(k) plans and a money-purchase plan (all of which totaled about $1.7 billion in assets with 28,000 participants) and was able to save a significant amount of money. The process, which included the PLANSPONSOR Pathfinder vendor search service, took six months.
Cafaro argued that TRO should be about more than “data integrity.” Along with everything else, she stated, plan sponsors should press for the maximum amount of transparency for participants including a quarterly statement.
Robert Cirrotti vice president for product development & management, Prudential Investments, turned away a suggestion that a potential downside of TRO is that it might effectively lock in a plan sponsor with one mega-vendor even if the plan is dissatisfied with one of the included services.
“We don’t feel like we’ve locked you in. We feel like we earn it day after day,” Cirrotti said. “You can walk away from that situation and, as providers, we recognize that.”