Include all necessary interested parties in the process. This means including individuals with decision-making authority from Human Resources, Benefits, Labor Relations (if applicable), Finance, Payroll, and Legal. A collaborative effort will ensure that there is a clear understanding of the desired scope of services.

Determine a strategy that best suits your organization. The decision to utilize a sole source, competitive or collaborative outsourcing process may be dictated by a number of factors other than cost: the size of your organization, commitments to bargaining unit employees (if applicable), manpower required to manage the process, the type of plans you offer to employees (retirement and/or health and welfare), and the amount of assets held for investment.

Utilize a process that fulfills your fiduciary duties. This means you need to assess the qualifications of the service provider, the quality of the services it offers, and the reasonableness of the fees charged for those services.

Understand and document – in writing - the compliance obligations your service provider will assume. Complex new and ever changing benefit laws have significantly increased the risk of a compliance failure. Make sure all parties understand “who is doing what” when it comes to the applicable compliance obligations, and properly document the agreed-upon division of labor.

Determine the reasonableness of the fees and obtain – in writing – the provider’s commitment to provide all disclosures of direct and indirect compensation. In order to fulfill your fiduciary duties to plan participants and to avoid potential prohibited transactions, you are required to obtain disclosures of fees and compensation paid to plan service providers and their affiliates before signing the contract.

Determine if the indemnification provisions and liability limits (including insurance limitations) are acceptable. In order to make an informed business decision, you must first understand your downside risk if something goes wrong. Your internal team can assist in assessing the risk.

Never sign a service provider’s boilerplate agreement without legal review. Even if you are told that “everyone else just signs it,” there are opportunities to renegotiate terms and conditions – especially if they really want your business. However, since your benefit plan is a separate legal entity, plan service providers may not agree to incorporate standard contract terms and conditions applicable to non-benefit plan providers.