ASSESSMENT & CERTIFICATION:
ERISA Vendor Management		  
 
 

ERISA imposes a supply chain management duty on organizations that sponsor qualified retirement plans. The new Regulation 408(b)(2) elevates that duty to the highest priority.

The proper management of vendors in the supply chain is a key focus of the Department of Labor's audit program. Flawed vendor management systems throughout the ERISA community are the major cause for the growth in breach of fiduciary duty lawsuits against retirement plan sponsors.

Roland|Criss can certify that the fees charged by your organization's retirement plan's investment and administration vendors are not excessive. The legal definition of "excessive" is not what most plan sponsors think. An assessment from Roland|Criss, performed in a fiduciary capacity, is the best way to achieve freedom from worry over vendors' fees.

The key benefits of a certification of conformance to ERISA's vendor management rule include:

  • improved investment performance;
  • compliance with ERISA's supply chain management rule;
  • continually improving fiduciary practices;
  • reduced fiduciary risk for the organization;
  • improved stewardship skills;
  • fiduciary excellence is transformed from a mere concept to a tangible reality.
 
WHAT THE DEPARTMENT OF LABOR SAYS ABOUT VENDOR MANAGEMENT:
"The market for retirement plan services is characterized by acute information asymmetry  The information costs of plan service providers are far lower than their clients’.

Vendors are specialists in the design of their products, services, and compensation arrangements, and are continually engaged in marketing to plan sponsors.  Plan sponsors often lack this degree of specialization.  Even very large, relatively sophisticated plan sponsors shop for services only periodically, generally once every three to five years.  Smaller, less sophisticated plan sponsors face still higher information costs.  As a result, vendors are able to maintain an information advantage over their plan sponsor clients.

Vendors have a strong incentive to use their information advantage to distort market outcomes in their own favor.  Current ERISA rules hold plan sponsors rather than vendors accountable for evaluating the cost and quality of plan services.  And vendors can reap excess profit by concealing indirect compensation (and attendant conflicts of interest) from clients, thereby making their prices appear lower and their product quality higher."


U.S. Department of Labor
Federal Register, July 16, 2010
Contact us now about certification of your ERISA supply chain.

 

 

t ERISA rules hold plan sponsors rather than vendors accountable for evaluating the cost and quality of plan services.  And vendors can reap excess profit by concealing indirect compensation (and attendant conflicts of interest) from clients, thereby making their prices appear lower and their product quality higher."


U.S. Department of Labor
Federal Register, July 16, 2010