Articles | May 13, 2020
It’s difficult to overstate the importance of a good benefits administration system. Finding the right system for your plan helps create efficiencies and frees up your benefits administration team to work on key initiatives and other projects. But wading through the crowded marketplace of vendors could lead to a less than ideal match. That’s why it’s important to focus your efforts upfront to identify the one that meets the needs of your plan.
We break down the five reasons why issuing an RFP stands out as the most effective way to select a new benefits administration system.
An RFP requires all vendors to bid on the same system requirements through a uniform process.
Through the process, you’ll collect all initial and ongoing costs associated with the system and compare each cost between vendors (license, implementation, support, hosting, hardware, etc.) to avoid any surprises down the road.
You’ll also spot the differences between systems and vendors’ implementation processes, allowing you to compare and contrast system functionality that best meets the needs of the plan. The process includes developing system requirements, evaluating responses, defining selection criteria and ranking them in order of importance to your plan, as well as weeding out vendors and systems that don't meet the needs of your plan.
When you issue an RFP, you let vendors know they’re part of a competitive bid process. This creates an incentive for vendors to offer the version of their product that best meets the needs of the plan at the best price. This competitive process will provide leverage to the plan when negotiating fees and project scope with each vendor.
The data you gather from vendors during the RFP process will tell you about their industry experience, what other clients they service, financial stability and more. As part of the due diligence process, you will view system demonstrations from each vendor. By asking each vendor to demonstrate how they will address the most challenging administrative functions of your plan, you can further evaluate each vendor and how they would work with your organization.
The RFP and the vendor response (i.e., functional requirements, fees, etc.) ultimately become an essential part of the contract between the plan and the selected vendor. Representations the vendor makes during the process also become part of the contract between the plan and the vendor.
Often benefit administrators are contemplating selecting a “custom off the shelf” solution versus developing their own system. The RFP process will allow the plan the information they need to provide a comparison for this option. This would allow the plan to compare costs, resources, timelines, etc. and make a more informed decision.
In addition, as a result of the RFP process, the plan may end up considering a “best of breed” approach as you learn more about the strengths and weaknesses of each benefits administration system. For example, as you go through the RFP process you may find that one vendor best meets the retirement administration needs of the plan and a different vendor best meets the needs of the health administration needs of the plan.
A well-crafted RFP should include the following:
Our consultant professionals have performed hundreds of benefits administration and related system searches for retirement and health plan organizations. We know the vendor market and can convey those needs to potential bidders to help ensure that they are able to deliver the services your plan is seeking. Other ways we can help include:
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