Case Study
The senior management of a higher education institution felt the need to update its approach to overseeing vendors who service its ERISA-qualified defined contribution retirement plans to ensure compliance with evolving regulations, meet emerging data security threats, and adapt to the changing needs of the plans’ participants.
The Dimensions of Change
The institution’s fiduciaries envisioned a two-fold opportunity to enhance the outcomes of the retirement plan complex.
First, commissioning an independent expert to analyze the fees charged by service providers meticulously would ensure that those fees are reasonable and justified. This thorough analysis identifies excessive or hidden fees, ensuring they do not overburden plan participants with unnecessary costs. By negotiating better terms or switching to more appropriately priced vendors, the fiduciaries thought they could optimize the plans’ expenses, benefiting the participants by preserving and optimizing their retirement savings.
Second, AI-enabled tracking technology exists that can monitor the cybersecurity capabilities of the plans’ vendors. A proactive approach such as this ensures that the vendors handling sensitive participant data adhere to the highest cybersecurity standards. By regularly evaluating and updating their cybersecurity protocols, fiduciaries can protect the plan participants’ assets and personal information from cyberattacks. Safeguarding the participants’ financial well-being while building trust and confidence in the retirement plan’s management.
Together, these strategies enable fiduciaries to enhance the efficiency and security of the retirement plans, ensuring better outcomes for all participants, while enhancing their conformance to fiduciary standards of care and adopting a new third-party risk management framework.
Details
Transforming the process end-to-end
SOLUTIONS
The fiduciaries consolidated recordkeeping on one of the four previously available platforms, streamlining operations, improving data security, and unifying the participant communication program. The fiduciary committee established a comprehensive vendor assessment program to systematically enhance the efficiency and cost-effectiveness of the plans’ operations. That transition was followed by a strategic renegotiation of the vendors’ fees.
Additionally, the transfer of investment advisory services from the recordkeeper’s affiliate to a new advisor that serves the committee ensures unbiased and high-quality financial guidance.
The fiduciary committee’s adoption of an annual fee assessment schedule further strengthened the program by rigorously evaluating each vendor’s costs and service quality, ensuring that compensation remained fair and justified. This holistic approach not only optimized vendor performance but also reinforced the program’s commitment to fiduciary responsibility and participant satisfaction.
IMPACT
The fiduciary committee’s successful negotiation of lower fees for recordkeeping and investment advice led to substantial cost savings for the plan.
By replacing the recordkeeper’s proprietary mutual funds with lower-cost share class funds, the committee further reduced expenses, enhancing the overall value for participants.
Additionally, the elimination of mutual funds with revenue sharing significantly increased transparency regarding investment costs, allowing participants to clearly understand the fees associated with their investments. This move not only fostered greater trust and satisfaction among participants but also mitigated the fiduciaries’ litigation risk by ensuring that all costs were fully disclosed and justified.
Overall, these strategic changes reinforced the committee’s commitment to prudent financial management and participant-centric decision-making.
LESSONS LEARNED
Measurable Impacts
The job of monitoring the plans’ service providers is incomplete unless it yields measurable results that demonstrate improvements in service quality and cost efficiency. Third-party risk management is an essential fiduciary practice.
Assessments Are Vital
A comprehensive assessment of each service provider uncovered significant servicing and pricing issues, highlighting the necessity for periodic assessments to ensure ongoing efficiency and cost-effectiveness.
Technology Helps Fiduciaries
AI assists retirement plan fiduciaries by offering real-time tracking of service providers, ensuring continuous monitoring and prompt identification of any issues that could impact plan participants’ data security.
“We felt like we had a true partnership with Roland|Criss—it led to a much more efficient retirement plan structure, and our service providers’ fees declined, too.”
Chief Financial Officer
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