Provider Benchmarking Requires Organization and Coordination

In order to complete a thorough benchmarking study of a retirement plan provider, it is vital that an adviser first understand a company’s culture and what the plan sponsor is looking to achieve.

Speaking at PLANSPONSOR’s Plan Designs conference in Chicago, when beginning a benchmarking study, it is important that those involved determine the rating system ahead of time and know what the action will be if the current vendor falls below an acceptable rating, said Rebecca Hodgin, Manager of Retirement Services at Reynolds and Reynolds. Also, sometimes it is not always the vendor, but the relationship manager, so, Steff Chalk, President, Chalk 401k Advisory Board, Inc., suggested it might not be necessary to change providers but instead just switch the relationship manager.

Saying he would prefer his clients not change providers because switching is a serious detriment to the participants, Michael Kozemchak, Managing Director, Institutional Investment Consulting, commented, “we can take even the lousiest provider and get better service.” And, he said. “We don’t do any deal today without service guarantees.”

Advisers can bring significant value to the sponsor and the benchmarking process, Barbara Delaney, President of FFOA, commented. “Not everyone can benchmark on a daily basis,” she said, but advisers working with multiple clients at the same vendor know what services and pricing are being offered to new clients, and have the opportunity to see if the vendor will extend that offer to existing clients.

The Process


“If you want your plan to get better – why are you including lowest quartile or lowest 50% [of vendors] in the peer group [for comparison]?’ asked Chalk.

The process should work within the mission and values of organization, Chalk said. A benchmarking study should incorporate prudent policies as required by ERISA, should use good fiduciary practices, and should use a balanced scorecard approach. The scorecard will include examinations of fees, process, and 401(k) plan design, among other things.

Adviser Payment Schedules


All three panelists had their own payment schedules, though most agreed with Kozemchak that in a plan around the $50 million space, an adviser can expect to charge between $20,000 and $100,000 for the project. There are a host of different types of consultants and advisers working with retirement plans, and there are various ways to approach the subject of benchmarking. Therefore, Kozemchak said, it is up to the plan committee how they want to pay for it.

Chalk said he gets paid either a project fee or is paid hourly, depending on the client. According to Delaney, her pricing varies depending on whether she is being retained for quarterly reviews and ongoing service, or just for a straight benchmarking study.



There are multiple approaches to evaluating fees, the panelists agreed. Chalk said he was more interested in the total fees charged to a plan, and not so much what a provider is doing with those fees. Further, he commented, “the lowest price doesn’t tell you anything if you have no knowledge of the value and services.”

However, Kozemchak pointed out that regulations require that the sponsor monitor and have some awareness of what these fees are, so it is important that, even if how the fees are being used is not know, what is being paid is known.

Overall, most time the vendor is doing things right, Delaney said, but issues sometimes arise with M&A activity. Further, Chalk commented, it might be the plan sponsor’s ability to make sure they aren’t falling down.