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Fine-Tune Your Plan Through the RFI/RFP Process

Jim Modelski, CFSPrincipal

DiMeo Schneider & Associates L.L.C.Chicago, Illinois

14B-1

Common Practicesfor Fiduciaries

14B-2

What the DOL Says About Fees

“REASONABLE” FEES

14B-3

Annual Checklist

• Monitor fees• Monitor services• Benchmark fees

RFI every 3-5 years RFP every 5-7 Years

14B-4

RFIs and RFPs

14B-5

Best Practices for RFI/RFP Process

• Desired outcomes• Process• Rationale for any decision• Document• Retain

14B-6

RFI? RFP? What’s the Difference

RFILeads with fees first

Service is secondRFP

Lead with service firstNegotiating tool

Fees are second

Prepared to change

14B-7

Fees

14B-8

Services and Fees

Investment FeesRelated to the management of investment options

• Investment management fees

• Distribution and/or service (12b-1) fees

• Transfer agent, custody, accounting, legal fees

• Sales charges (typically waived for 401(k) plans)

• Insurance based products may have surrender and transfer charges

Administration FeesDay-to-day operation of plan

• Plan recordkeeping• Legal and trust services• Telephone

representatives/voice response system

• Internet (account information and conduct transactions)

• Communication/education services

Individual Service FeesRelated to optional “elected” services

• Loans• Distributions/Withdrawals• Self-directed brokerage• Managed account fees

Other FeesOther miscellaneous fees

• Legal• Audit• Advisory/Consulting

14B-9

Fee Evaluation

14B-10

Recordkeepers Look At . . . Common inputs record keepers use to model fees 1. Size2. Complexity3. Specialized services4. Number of payrolls5. Average account balances6. Cash flows/growth of plan7. Use of proprietary funds8. Number of locations9. Education days10. Other factors

14B-11

RFI . . . Putting It Together

14B-12

RFI . . . What It Takes

Draft and Issue RFI

•Be upfront with all vendor candidates

•Plan statistics are key

Summarize and Follow 

Up

•Follow up outliers. Are costs/services accurate?

•Prepare evaluation

Negotiate •Fees•Services

RFI Process

14B-13

• Plan details# of locations# of payrollsEligibilityVestingMatchAuto enrollment, etc.

• Demographics• Cash flows• Any future changes to Plan • Investment menu

RFI Draft Includes

14B-14

RFI Negotiations

Fees

Be transparent with current vendorBest quote we’ve received, can you matchMay mean accounting for services

Services

Ask first, will we use the service What can they take off my plateHow does this translate into $$

14B-15

RFP . . . Putting It Together

14B-16

RFP Process

14B-17

Criteria For RFIs and RFPs

14B-18

Data Security

• Authentication procedures• Firewall protections• Penetration vulnerability testing• Encryption policies • Data breach policies• Incident response team

14B-19

RFP Timeline

14B-20

Selection Process

14B-21

Resources

14B-22

Who Can Help You?

3rd party, direct service companies Consultant/Advisor ERISA attorney Staff

14B-23

What You Get

3rd Party, Direct Service  Consultant/Advisor/ERISA Attorney

Tech company Professional service firm

Database, template Custom

Typically no consultation Consultation

No summaries Summarized report

No negotiations on your behalf Lead the negotiation process

Very little or no leverage  Leverage

Relatively lower cost  Relatively higher cost 

14B-24

Resources for RFIs/RFPs

• SPARK Institute—search RFP template • 401khelpcenter.com—search RFP template • Consultant/Advisor• ERISA attorney• Other contacts

14B-25

Next Steps

14B-26

To Do• When was the last time you surveyed the marketplace

– 3-5 years = RFI

– 5-7 years = RFP

• Desired outcome?– If fees, then

• RFI

– If services, then• RFP

• Who leads the project? You? 3rd party?• Customize the RFI/RFP!• Process/timeline• Rationale for decision, next steps• Document and retain

14B-27

Thank you!

Note: This report is intended for the exclusive use of clients or prospective clients of DiMeo Schneider & Associates, L.L.C. Content is privileged and confidential. Any dissemination or distribution is strictly prohibited. Information has been obtained from a variety of sources believed to be reliable though not independently verified. Any forecast represent median expectations and actual returns, volatilities and correlations will differ

from forecasts. Past performance does not indicate future performance.

14B-28