It is crucial to choose service providers that fit your organization and its needs. It is a fiduciary responsibility, best for the Plan’s participants, and essential for your organization’s operations.
The implications of poor service providers can be significant:
- A recordkeeper with insufficient staffing and inadequate systems, given the size and complexity of your Plan, could result in incorrect allocations of investment earnings, incorrect payment of benefits and more.
- A death search vendor ill-equipped to handle the size and complexity of your Plan could result in overpayments that cannot be recovered.
- A claims administrator inexperienced with your Plan’s size could result in benefits paid improperly or for ineligible participants.
- An investment custodian with inadequate or erroneous reporting can compromise the effectiveness of oversight and lead to materially misstated financial statements.
Given the potential implications and intricate web of responsibilities, the selection of service providers demands strategic consideration. It’s imperative to review the contract terms and integration between your organization and a provider, as transitioning to a new provider can take an extended period of time. Additionally, inadequate service providers also require a considerable amount of time and effort from your staff. The investment of time could be better spent building your organization, preparing for the future and serving your members and participants.
Selecting the Best Service Provider
To put you on the right track, below are examples of considerations to help you select the best service providers for your organization:
- Ask for example reports. Are they sufficient for ongoing monitoring? Do they efficiently provide all information needed to record transactions within your organization’s accounting and recordkeeping systems?
- For multiemployer plans, does the provider have expertise with Taft-Hartley plans specifically? This is important given the legislative, regulatory, and operational considerations unique to these plans.
- What is the average size of plans serviced by the provider, and where does your Plan fall relative to that average? Consider more heavily those providers who service larger plans as their infrastructure exists to handle yours, and you can utilize their industry experience to improve your organization.
- Was an unmodified report issued? What subservice organizations are used? What exceptions were noted from testing the control objectives, and what could impact your organization? What will be required of your organization to implement all user controls outlined?
- What is the provider’s reputation? You can evaluate this online or by connecting with current or past customers.
- What is the provider’s account management process? Will you be assigned to a sole representative or a group? How are issues escalated if they arise?
In addition, the Department of Labor (the “DOL”) issued two fact sheets to reference when preparing your RFP and navigating the selection process: Tips for Selecting and Monitoring Service Providers for Your Employee Benefit Plan and Tips for Hiring a Service Provider with Strong Cybersecurity Practices. Use these to assess and monitor service providers on an ongoing basis.
Use these guidelines to help you make informed decisions for selecting service providers. Choose a provider that can elevate your organization. To leverage the relationship, be willing to evaluate your existing processes and controls to better adapt to those of the service provider.
Authors: Alyssa Harbaugh, CPA | [email protected] and Monica Baker | [email protected]
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For more information on this topic, please contact a member of Withum’s Multiemployer Benefit Plans Services Team.
