YOU HAVE FOUND OUR OLD WEB SITE. BE SURE TO CHECK OUT OUR NEW AND IMPROVED SITE!     Employers: Limit Number of 403(b)/457(b) Vendors Through RFP Process     More usually feels like, well, more. But as we all know, more doesn't mean better. This is especially true when it comes to investment choices in retirement plans like the 403(b) and 457(b). Researchers at Columbia University have found that choice overload in retirement plans leads to less participation. Their key findings: "after controlling for the employer match, participant demographics, and other variables, the probability that an employee will join a savings plan decreases modestly as the number of options increases." More precisely the researchers report: Every additional 10 investment choices on average reduces predicted participation rates by 2 percent.   Pity the employees of the nation's largest school district Los Angeles Unified School District. LAUSD "boasts" more than 140 vendors. Assuming each vendor offers only 10 investment choices that is 1,400 choices the employee must wade through.   Colleges, universities, hospitals and other not-for-profit organizations tend do a much better job of limiting vendor choice than k-12 public schools. These institutions typically offer a limited number of vendors that have been selected through the Request for Proposal (RFP) process. The RFP allows the employer to get a quality plan at a quality price. It is not dissimilar to getting a bid for work on your house or car. An employer puts out an RFP and interested vendors submit their offers. The result? Simplification, increased participation and a cheaper plan. Another way to look at it is: when vendors compete, employers and employees win.   Brad Smith, a principal at consulting firm Bolton Partners Investment Consulting Group, Inc., a 403(b)wise sponsor, said limiting vendors, and selecting vendors through the RFP process saves participants money. "Participants are the ones paying all the fees," he notes. "Employers have the power to negotiate fees."   Other benefits include:     access to higher quality investment options in all appropriate asset classes — vendors would pitch their best products     better control of compliance — only dealing with limited number of vendors     reduction in employer paperwork and administration     employer could demand that online enrollment be offered     plan more likely to be perceived as a benefit     The RFP process allows the employer to call the shots while ensuring IRS compliance. The big caveat, of course, is that a quality vendor or vendors must be selected. Firms like Smith's Bolton Partners Investment Consulting Group, Inc. exist to help employers make wise decisions. One last caveat: the consulting firm aiding in vendor selection must have no affiliation with vendors, and must not sell product.     Home | Disclaimer | © 2003 bWise Guys, LLC. All rights reserved.				Related Information: Vendor Selection