Vendor Search for 401(k) Plans

Fiduciary Advisors, Inc. (“FAI”) understands the importance of having the right vendor for our clientele’s 401(k) Plans.  The services offered by the hundreds of vendors vying for business are, at least on the service, very similar.  We help our clients understand that by engaging a vendor, they delegate a large portion of their plan’s operations to a third party, but not the responsibility for keeping the plan compliant with ERISA.  So, our vendor searches are designed to identify service providers that have participant recordkeeping and/or investment transactions systems capable of keeping the plan qualified under ERISA for a reasonable fee.

FAI’s Vendor Search Process:

  • Gain an understanding of the current environment – We start with the components of effective plan management and ask questions such as:  Who is responsible for keeping the plan document in compliance with ERISA?  How is eligibility determined?  Who is responsible for investment management?  How are plan assets currently invested?  Are changes to the investment menu wanted?  How is education provided to participants?

  • Gain an understanding of the current fee structure – This is easier said than done because fees are sometimes hidden.  We identify, to the best of our ability, how the services identified above are paid for.  What services are covered by asset charges (wrap fees) and what is the fee?  Are 12(b)(1) fees associated with the investments of the plan?  Who receives them?  What management fees are associated with funds held?  Are you holding Class A shares, when Class 5 shares might be less expensive?  Are there charges to participant accounts for transactions processing?  Are there fees associated with sales of investments in connection with fund transfer or benefit payment?  We go through this analysis so that we can properly evaluate offerings of potential vendors.

  • Prepare and distribute a request for proposal (RFP) - An RFP documents the needs of the plan and asks potential vendors how they would meet these needs and at what cost.  FAI would work with the client to identify potential vendors.

  • Evaluate proposals returned by potential vendors – FAI compares services and fees offered by a vendor to those offered by all responding vendors.

  • Select a vendor and document the reasoning behind the selection – FAI will present their analysis of vendors and assist the client in their final selection. This process will be documented to meet the client's fiduciary duty.