A checklist for retirement plan fiduciaries amid industry consolidation

How a retirement plan recordkeeper change may trigger your fiduciary duty

ERISA requires that retirement plan fiduciaries have—and follow through with—a prudent process in selecting and monitoring service providers, including recordkeepers. With so much ongoing consolidation among recordkeepers, it’s likely that at some point, your recordkeeper could either acquire or be acquired by another recordkeeper. The consolidation isn’t a bad thing, as much of the motivation involves attaining the scale required to keep fees relatively low, technologies up to date, and service levels high. But merging two recordkeeping platforms, teams, technologies, and cultures isn’t easy, and it could bring change to your plan. Even if your recordkeeper is doing the acquiring, it could still affect your plan—by changing its focus or when migrating your plan to the new platform. 

This is where your duty to monitor kicks in, requiring you to perform your due diligence to determine whether and how the change will affect your plan and participants. You may only need to do some minor due diligence and benchmarking, or you may need to issue a full request for proposal (RFP). Here are some questions you should be asking when your recordkeeper goes through a merger or acquisition. The answers will help you determine which action you should take.

A checklist to help with your fiduciary duty

Review your original contract and selection process. Why did you choose this recordkeeper? Was it their fee structure, reporting capabilities, technology, service model, plan sponsor website, participant experience, or administrative/operational capabilities? All of your decisions and processes should be well documented—part of your fiduciary duty—so it should be somewhat easy to go back and review your selection criteria.

Consult with your plan’s financial professional. Here are some questions to ask:

• What’s your financial professional’s experience with the acquiring/acquired recordkeeper?
• Does the financial professional currently have any plans with the recordkeeper? 
• Has the financial professional recently benchmarked any of its retirement plans with that recordkeeper? 

Find out if you’ll need to sign a new service agreement. Your service agreement may just be assigned to the new entity, or you may be required to sign a new agreement. If it’s the latter, you may want to issue an RFP. 

Do your due diligence on the new entity. As a minimum guideline, find out: 

• The company’s reputation in the marketplace
• Its experience with other plans like yours (e.g., size, type, and complexity) 
• The goal of the consolidation 
• Any recent litigation against the company

Ask how your services might change. Recordkeeping touches almost every aspect of your plan, so make sure you ask how the following items will be handled by the new entity:

• What’s the service model? Who will be your single point of contact?
• How do you define a retirement program’s overall measure of success?
• What’s the issue resolution process when something goes wrong?
• What tools and reporting are available to the plan sponsor? 
• Are the same investments available? 
• Will the fee structure change? What’s included in the fees, and are there additional charges for sponsor or participant services? Are there any proprietary fund requirements? 
• If you’re signing a new agreement, how different are the terms, such as limitation of liability, indemnity, data security, business continuity, and disaster recovery?
• Does the new ownership present any potential conflicts of interest?
• What tools and services are available to participants?
• How will the changes be communicated to participants? 
• What’s the timeline for the change? What’s the opt-in/-out period? 
• Will there be blackout dates that delay transactions, loans, and distributions? How will they be communicated to sponsors and participants? 
• Ask for a reference from a client with a similar plan.

Document your decisions and exercise prudence 

Change is constant, and it can bring about both positive and negative outcomes. As a retirement plan fiduciary, it’s your duty to know what type of an impact the recordkeeper acquisition may have on your plan. You may decide to stay with your recordkeeper, or you may decide to leave. But, as with all your fiduciary duties, it’s vital that you go through—and document—a prudent process to evaluate your options as you make your decision.

1 “Recordkeeper Consolidation: A Retirement Plan Industry Trend,” CAPTRUST, 3/22/21.