Case Study: ERISA Plan Cost Assessment
Situation:
A healthcare organization (“HCO”) was the target of heavy competition by a crowd of retirement plan service providers. The HCO sponsored a 401(k) plan and a pension plan for its employees. The plan fiduciaries were comprised of both medical and business professionals who took to heart their roles as stewards on behalf of their employees.
The HCO’s executives listened to plan vendors promise better benefits for less cost. While they sensed these claims might have been too good to be true, the plans’ leadership wanted to demonstrate an objective process for evaluating current fees and service levels as a first step before engaging in a time-consuming and costly request for proposal process.
Approach:
Roland|Criss:
- Conducted our ERISA Regulation 408(b)(2) cost assessment and established a monitoring process going forward that is substantiated by legal mandates.
- Worked with the CFO and the Retirement Plan Committee, who were responsible for overseeing the plans’ vendor supply chain.
- Verified, tested, and opined on the reasonableness of the plans’ service providers’ fees with the use of a sophisticated data collection system, provider review criteria, and a fee benchmarking resource.
Result:
The cost assessment resulted in powerful outcomes for the plans and a clear road ahead for the HCO’s executives, including:
- A legally defensible opinion from Roland|Criss of the reasonableness of the plans’ costs,
- A common language for the plans’ fiduciaries and an awareness of the murky and complex tactics for monitoring an ERISA plan’s costs,
- Clarification of the plans’ service providers’ roles and accountabilities,
- Interpretation of the plans’ vendors’ complex fee structures, correlating fee types with vendor categories, and unraveling jargon about the direct and indirect revenue paid to providers,
- Upgraded and enhanced current service agreements and establishing effective performance measurement metrics, and
- Generated a 30% reduction in plan expenses by eliminating duplicitous functions and establishing more precise deliverables.
