‘Free’ plan implementation can come with big costs

Andy AdamsThought Leadership

“Free implementation” has become a ubiquitous element of benefit plan administration proposals today. That’s because the biggest impediment to plan sponsors switching benefit administrators is the enormous up-front cost of implementation.

It’s understandable that plan sponsors seeking improved servicing or a better deal would find an offer of free implementation appealing. But, rest assured, with free implementation, you get what you pay for. All the processes necessary to make the switch will cost your selected vendor a lot of money — sometimes upward of a million dollars for large organizations with complex benefits and legacy plans. More often than not, a small portion of these costs are eaten by the vendor-elect, and the balance is quietly folded into the plan sponsor’s extended contract — so either the plan sponsor or the participants pay most, if not all, of the conversion costs over time.

But there’s a second part of the equation that few plan sponsors consider. On top of paying vendor conversion costs that are buried in the contract, plan sponsors still must set aside significant internal resources and funding to support the implementation. To be done correctly, regardless of what any vendor will tell you, the plan sponsor must remain heavily involved.

Understanding the true cost of implementation will help plan sponsors evaluate potential benefit administrators and initiate the implementation process with eyes wide open and a more realistic budget…

This is an excerpt; read the full article in PLANSPONSOR.