07.03.2018 06.43 GMT+0000

ERISA requires that plan fiduciaries must evaluate the “reasonableness” of provider contracts. This goes beyond provider revenue generated directly from plan services and includes all revenue generated in connection with the plan. Fiduciaries should take note.

Selecting and Retaining Service Providers: Time to Dig Deeper?

Selecting and Retaining Service Providers: Time to Dig Deeper?

Plan fiduciaries need to respond to changing industry practices. The next challenge in protecting plans may be fees for non-plan related financial products.

There is ongoing pressure on plan providers to continue to lower fees. And, it is reasonable to expect providers to seek alternative sources of revenue that may not be part of plans’ direct costs. In monitoring providers, fiduciaries should take note of rules under ERISA that require fiduciaries to obtain information from providers about both direct and indirect compensation that will be received by providers “in connection with” the plan services. This requirement goes beyond simply negotiating plan fees and beyond the general “prudence” requirements.