Managing Partner Jim Scheinberg recently spoke with PLANSPONSOR on what plan sponsors should understand about DB plan administration, the interplay of providers, and what duties sponsors are falling behind on.
“An area of key fiduciary responsibility for DB plan sponsors is the selection and monitoring of service providers.
But Scheinberg, whose firm focuses on provider searches, says it almost never sees routine requests for proposals (RFPs) for actuaries unless the plan is having a specific difficulty. “We always see overpayment for actuarial services,” he notes.
He adds that there is also far too little monitoring of investment service providers. “In the DC plan space, litigation and fee disclosures required under Employee Retirement Income Security Act (ERISA) Section 408(b)(2) make plan sponsors more aware of need to monitor investment providers.
“That section [of ERISA] also covers DB plan service providers, but the entity that typically has standing to sue is the plan sponsor, not participants, and a plan sponsor wouldn’t sue itself. That’s the reason it is not as urgent to oversee service providers. However it should be because it has implications for the overall organization,” Scheinberg says.
When it comes to plan administrators and custodians, he says there’s not such a need for heavy scrutiny, outside the fact that some have very antiquated processes and systems. “So service issues will dictate whether an RFP is needed.”
Scheinberg adds that every time it issues RFPs for investment advisers, OCIOs or actuaries, it finds efficiency improvements.