Retirement Plan RFPs Every 3 Years – The New Normal?

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When you consider all the changes taking place this is a excellent solution to verify the quality of your retirement plan. Your employees and yourself require the best possible plan in order to successfully retire. A well managed retirement plan has the ability to attract and retain top talent.

In the preamble to its 2010 service provider fee disclosure rules, the Department of Labor (DOL) assumes (or one might say suggests) plan sponsors conduct an RFP about every three years. While this is contrary to industry studies concluding a majority rely on outside consultants or studies instead of RFPs, the 2011 Seventh Circuit Court of Appeals decision in George v. Kraft Foods is reinforcing concerns this is the new normal for a prudent plan fiduciary.Kraft’s 401(k) plan participants sued for breach of fiduciary duty alleging Kraft should have done an RFP every three years and this failure resulted in payment of excessive investment fees to the plan’s service provider. A lower court accepted Kraft’s defense that it relied on expert outside consultants to ensure fees were competitive when extending that service provider’s contract multiple times and granted summary judgment in Kraft’s favor. On appeal, the Seventh Circuit rejected that as an absolute defense and sent the case back for a trial, which could end up costing more than settling.

The retirement crisis will result in additional regulations. Plan sponsors must take their company sponsored retirement plan more seriously or risk employee and regulatory backlash.

Please comment or call to discuss how this affects you and your company.

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