PLANSPONSOR - June/July 2019 - 22

According to Tim Rouse, executive director at The SPARK
Institute in Simsbury, Connecticut, there are many recordkeeper
service attributes that most vendors offer today-including
various qualified default investment alternatives (QDIAs), plan
sponsor and participant websites, and the allowance for participant
loans-but sponsors continue to cite these in their RFPs, anyway.
However, some other considerations are becoming differentiators
and may be key in a provider search as employer-sponsored retirement
plans grow increasingly sophisticated and complex.
1.
Privacy. What immediately comes to mind for Marina
Edwards, senior director, retirement, at Willis Towers
Watson, in Chicago, is the recent settlement by Vanderbilt
University in an Employee Retirement Income Security Act
(ERISA) lawsuit that demonstrates plaintiffs' and litigators' focus
on retirement plan data. In short, the agreement stipulates that
plan data will not be used by service providers such as recordkeepers
or asset managers for the purpose of cross-selling wealth
management services and products to plan participants.
Therefore, Edwards says, " plan data needs to have the same
level of care as fiduciaries apply to plan assets. Plan sponsors
need to be able to show due diligence that they have investigated
those policies, provisions and operations of the different recordkeepers.
Every recordkeeper has to indicate how it protects this
PPI from not only hackers and cyber crime, but from internal
partners cross-selling services. "
" Depending on the size of the plan sponsor, you might
have real difficulty in negotiating terms this way and stipulating
exactly what a provider can or cannot do with data, " said
David Levine, a principal at Groom Law Group Chartered, in
Washington, D.C., speaking to PLANSPONSOR after the settlement
was announced. " And there is the core question of how to
define what plan data is and what is the proper use of plan data.
This all is still to be fleshed out. "
" One other important caveat here, " said Groom Law Group
principal Kevin Walsh, " is to remember that, through this settlement
requiring tough terms of providers' use of data, this may
make it harder for the plan sponsor to be tough on other elements
of contract negotiations. Plan data is important, but if you focus
myopically on data, it may limit your ability to negotiate on other
critical terms. "
2.
Cybersecurity. Cybersecurity is connected to privacy
concerns but slightly different. Privacy concerns relate to
legitimately sharing data; cybersecurity is about protecting data
from illegitimate uses. Rouse says the number of detailed questions
sponsors ask recordkeepers on this topic has skyrocketed,
and recordkeepers worry about sharing their security processes.
" It has gotten to the point where the providers have to say, 'I
know you're my client and that you need to know your plan data
is protected. At the same time, I can't share with you the ways I'm
going to protect your plan data because that information can get
22 PLANSPONSOR.com June - July 2019
out and eventually be used by the bad guys.' "
In order to reassure sponsors and consultants, through the
work of its data security oversight board, SPARK has developed
standards to help recordkeepers confirm to current and potential
clients the full capabilities of their cybersecurity systems.
These standards are not intended to provide a recommended
level of cyberprotection, or guarantee against a data
breach or loss, Rouse says. Rather, the goal is " to establish a
base of communication through the use of independent thirdparty
audits of cybersecurity control objectives. " In this way,
sponsors and vendors can validate the robust nature of their
cybersecurity systems.
After this Industry Best Practice Data Security Reporting
program was implemented, SPARK did a survey. Rouse says,
" We didn't get a response back from everyone, but 12 of the 14
respondents have already implemented these SPARK cybersecurity
standards. Each recordkeeper will create a report that can be
used to compare one vendor's security efforts with another's. "
3.
Participant Wellness Metrics. With what appears
to be an industrywide interest in participant financial
wellness, plan sponsors also increasingly see the value
of measuring the usage and effectiveness of their wellness
programs, Edwards says.
" Plan sponsors are asking in RFPs what kind of reporting
can be done by the provider, for instance, on a monthly, weekly or
daily basis, to let the sponsor know, of its 5,000 participants, for
instance, how many used a particular wellness website tool, or
listened to a particular webcast? What do the analytic dashboards
look like, and will the provider run reports for the plan sponsor
or is the reporting system set up in such a way that the sponsor
has access to create the reports itself? "
4.
Revenue Sharing. The concept of fee levelization is
garnering attention from defined contribution plan sponsors
and advisers industrywide, due to the increased volume of
litigation over plan costs, and the focus of the Department of
Labor Employee Benefit Security Administration (EBSA) on fee
disclosures.
According to Michael Volo, senior partner at Cammack
Retirement in Sudbury, Massachusetts, " With fee levelization, the
recordkeeper applies its recordkeeping fee as a percentage of assets
to each individual investment option. " If revenue sharing in the
option exceeds the recordkeeper's required revenue, it credits each
participant who has assets in the fund with a share of the excess,
he explains. If the investment provides less than the required
revenue amount, the recordkeeper divides an additional fee, in
the amount of the shortfall, among the accounts of those using
the investment. " A participant with several different investments
might experience multiple credits and debits based on the revenue
sharing in each investment, relative to the required revenue. "
Are recordkeepers able to adjust for revenue sharing?
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