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Fact Sheet: Tips For Selecting And Monitoring Service Providers        For Your Employee Benefit Plan

May 2004

As sponsors of 401(k)      and other types of pension plans, business owners generally are      responsible for ensuring that their plans comply with Federal law –      including the Employee Retirement Income Security Act (ERISA). Many      businesses rely on other professionals to advise them and assist them with      their employee benefit plan duties. For this reason, selecting competent      service providers is one of the most important responsibilities of a plan      sponsor. The process of selecting service providers will vary depending on      the plan and services to be provided. To assist business owners in      carrying out their responsibilities under ERISA to prudently select and      monitor plan service providers, the Employee Benefits Security      Administration has prepared the following tips which may be a helpful      starting point:
-  Consider what services you need for your plan –          legal, accounting, trustee/custodial, recordkeeping, investment          management, investment education or advice.
-  Ask service providers about their services,          experience with employee benefit plans, fees and expenses, customer          references or other information relating to the quality of their          services and customer satisfaction with such services.
-  Present each prospective service provider identical          and complete information regarding the needs of your plan. You may          want to get formal bids from those providers that seem best suited to          your needs.
-  You may also wish to consider service providers or          alliances of providers who provide multiple services (e.g., custodial          trustee, investment management, education, or advice, and          recordkeeping) for a single fee. These arrangements are often called          “bundled services.”
-  Ask each prospective provider to be specific about          which services are covered for the estimated fees and which are not.          Compare the information you receive, including fees and expenses to be          charged by the various providers for similar services. Note that plan          fiduciaries are not always required to pick the least costly provider.          Cost is only one factor to be considered in selecting a service          provider. More information on pension plan fees and expenses can be          found in *Understanding Retirement Plan Fees and Expenses and the          401(k) Fee Disclosure Form*, located at www.dol.gov/ebsa.
-  If the service provider will handle plan assets,          check to make sure that the provider has a fidelity bond (a type of          insurance that protects the plan against loss resulting from          fraudulent or dishonest acts).
-  If a service provider must be licensed (attorneys, accountants, investment managers or advisors),check with state or federal licensing authorities to confirm the provider has an up-to-date licenseand whether there are any complaints pending against the provider.
-  Make sure you understand the terms of any agreements or contracts you sign with serviceproviders and the fees and expenses associated with the contracts. In particular, understandwhat obligations both you and the service provider have under the agreement and whether thefees and expenses to be charged to you and plan participants are reasonable in light of theservices to be provided.
-  Prepare a written record of the process you followed in reviewing potential service providers andthe reasons for your selection of a particular provider. This record may be helpful in answeringany future questions that may arise concerning your selection.
-  Receive a commitment from your service provider to regularly provide you with informationregarding the services it provides.
-  Periodically review the performance of your service providers to ensure that they are providingthe services in a manner and at a cost consistent with the agreements.
-  Review plan participant comments or any complaints about the services and periodically askwhether there have been any changes in the information you received from the service providerprior to hiring (e.g. does the provider continue to maintain any required state or Federallicenses).

This fact sheet has been developed by the U.S.        Department of Labor, Employee Benefits Security Administration,        Washington, DC 20210.  It will be made available in alternate        formats upon request: Voice phone: 202.693.8664; Text telephone:        202.501.3911.  In addition, the information in this fact sheet        constitutes a small entity compliance guide for purposes of the Small        Business Regulatory Enforcement Fairness Act of 1996.
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