Much has been written about what plan sponsors should include in a Request for Proposal (RFP) when they embark upon a search to hire or replace a retirement plan provider. But written proposals submitted in response to an RFP will never capture all of the essential elements that plan sponsors should assess in selecting a provider. It is therefore vital that plan sponsors recognize the potentially significant limitations of relying too heavily upon the RFP as a decision tool. No one in their right mind would buy a house on the internet; yet this is essentially what many plan sponsors are doing when they select a plan provider on the basis of data that has been dumped into a spreadsheet.
When plan sponsors begin an RFP process, it is commonly recommended that they utilize an RFP template and send out multiple RFP’s to several potential providers. This traditional RFP approach is extremely common and remains a fact of life in the retirement plan business. However, there are far more efficient ways to find and select providers. To the extent an industry standard exists, the ‘SPARK’ (Society of Professional Administrators and Recordkeepers) RFP is the most commonly utilized template. The SPARK RFP is thorough, but it is overly cumbersome. It focuses too heavily on the technical aspects, many of which are “commoditized” by noteworthy providers. It also neglects several critically important components of finding the right provider for your organization.
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