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Consider what services you need for your plan –
legal, accounting, trustee/custodial, recordkeeping, investment
management, investment education or advice.
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Ask service providers about their services,
experience with employee benefit plans, fees and expenses, customer
references or other information relating to the quality of their
services and customer satisfaction with such services.
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Present each prospective service provider identical
and complete information regarding the needs of your plan. You may
want to get formal bids from those providers that seem best suited to
your needs.
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You may also wish to consider service providers or
alliances of providers who provide multiple services (e.g., custodial
trustee, investment management, education, or advice, and
recordkeeping) for a single fee. These arrangements are often called
“bundled services.”
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Ask each prospective provider to be specific about
which services are covered for the estimated fees and which are not.
Compare the information you receive, including fees and expenses to be
charged by the various providers for similar services. Note that plan
fiduciaries are not always required to pick the least costly provider.
Cost is only one factor to be considered in selecting a service
provider. More information on pension plan fees and expenses can be
found in Understanding Retirement Plan Fees and Expenses and the
401(k) Fee Disclosure Form, located at www.dol.gov/ebsa.
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If the service provider will handle plan assets,
check to make sure that the provider has a fidelity bond (a type of
insurance that protects the plan against loss resulting from
fraudulent or dishonest acts).
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If a service provider must be licensed (attorneys, accountants, investment managers or advisors),
check with state or federal licensing authorities to confirm the provider has an up-to-date license
and whether there are any complaints pending against the provider.
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Make sure you understand the terms of any agreements or contracts you sign with service
providers and the fees and expenses associated with the contracts. In particular, understand
what obligations both you and the service provider have under the agreement and whether the
fees and expenses to be charged to you and plan participants are reasonable in light of the
services to be provided.
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Prepare a written record of the process you followed in reviewing potential service providers and
the reasons for your selection of a particular provider. This record may be helpful in answering
any future questions that may arise concerning your selection.
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Receive a commitment from your service provider to regularly provide you with information
regarding the services it provides.
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Periodically review the performance of your service providers to ensure that they are providing
the services in a manner and at a cost consistent with the agreements.
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Review plan participant comments or any complaints about the services and periodically ask
whether there have been any changes in the information you received from the service provider
prior to hiring (e.g. does the provider continue to maintain any required state or Federal
licenses).
