The last few years have been a time of upheaval in the benefits outsourcing market—so much so that it’s hard for plan sponsors to know what they should be looking for and who to consider when preparing requests for proposals (RFPs) for the outsourcing of their defined benefit (DB), defined contribution (DC), health and welfare, and nonqualified benefits.
The major players are changing
In the last two years alone, we’ve seen a large consulting firm divest its outsourcing division and another global services company spin off its outsourcing arm from its other, unrelated lines of business. Big players that previously exited the space have returned with great fanfare, only to exit again. Some vendors have turned to offshoring or near-shoring as a way to manage cost, while others are bringing operations back in-house after less than satisfactory forays into offshoring.
On the flip side, at least one major outsourcing provider is running hard at the market again after a long period of dormancy, and we’re even seeing new entrants to the benefits outsourcing arena, some of whom are garnering rave reviews from early adopters. It’s always been hard for plan sponsors to give equal consideration to boutique providers, and keeping an ear to the ground to learn about excellent providers that are relative unknowns is even harder in today’s fast-changing competitive landscape.
Divestitures and acquisitions can be extremely disruptive to outsourcing clients. These upheavals often trigger major migrations of account managers and other trusted partners, which in turn can have a negative impact on the level of service plan sponsors receive. More and more companies are considering changes to their lineup of benefits administration providers, and they’re finding it’s a full-time job to keep up with everyone who should be included in an RFP.
Plan sponsors’ tech needs have evolved, too
The technology requirements of plan sponsors are also rapidly changing, and as a result, today’s benefit administration RFP looks quite different than it might have just five years ago. Here are just a few areas where plan sponsors are rewriting their requirements lists:
- Proprietary vs. off-the-shelf core administration systems. Does the outsourced administrator rely on proprietary technology or an off-the-shelf solution, and how does this choice affect the cost and speed with which the administrator can roll out changes when requested or required? Both system approaches have their advantages and disadvantages.
- Reporting. Are the administrator’s reporting capabilities sufficiently advanced to meet the plan sponsor’s specific needs, such as allocating expenses across multiple business units and/or locations?
- Decision support tools. Does the administrator offer decision support tools that meet participant expectations for a modern, mobile-friendly user experience? This may include the use of artificial intelligence (AI) to help plan participants make better selections and help employers control costs.
- Security. Is the administrator up to date on the latest information security protocols, including multi-factor authentication, that are necessary to stay ahead of criminals? Contract language has also significantly evolved to address new concerns in the area of security.
- Participant experience. Rapid technological advances, including AI, are improving how participants access information and upload required documents. Some vendors are even expanding their use of AI to help employees easily navigate all human resource (HR) functions including recruiting, onboarding, payroll and benefits.
Running an RFP process and interpreting the results is a challenging task that has become even more challenging in recent years. When companies are struggling with their benefits outsourcing provider, we recommend they consider the vendor recovery approach before commencing a search for a new partner. If the relationship cannot be salvaged and an RFP is necessary, it can be beneficial to enlist the help of an expert that knows all the players in the space and understands what should be required of a benefits administration vendor today.
This article originally appeared in PLANSPONSOR.