An independent, non-profit research institute with 401(a), 403(b), and 457(b) plans split between two low-cost vendors, seeks to improve participant outcomes while further reducing the cost of investing to participants. The client had established two service providers running separate portfolios of proprietary investments available to participants. One provider was TIAA-CREF, providing proprietary annuity and mutual fund investments. The other was Vanguard, providing the entire menu of Vanguard investment products.
Providers competed for participant enrollments by providing onsite employee counseling sessions. However, because a two-vendor environment can inhibit fiduciary governance and operational efficiencies when all plan data needs to be consolidated by the client, The client engaged in a search process to evaluate potential solutions. The objectives of the client search were as follows:
- Minimize the cost of investing to participants
- Outsource compliance with IRS and Department of Labor disclosure and reporting requirements
- Improve the operational efficiency and internal controls of the plan
- Improve and streamline employee communication
The unique challenge for a shared TIAA-CREF / Vanguard client revolved around the already significantly below average cost of investing for participants, and loyal vendor followings by participants to both providers. How would the client consolidate the providers without having the change be perceived as a reduction of choice and increase in participant fees? The client determined that the best way to evaluate alternative vendor structures was through a competitive search process.