Benchmarking or RFP? How to Decide Which Your Plan Actually Needs
For most of ERISA's history, fee transparency was a retirement plan conversation
We benchmarked last year" is one of the most common answers a retirement plan committee gives when asked about provider oversight. It is a legitimate answer. It is also, frequently, an answer to a different question than the one being asked. Benchmarking and a request for proposal are both evaluation tools. They are not interchangeable, and treating them as substitutes produces a specific kind of blind spot.
Two questions, two tools
Benchmarking answers: how do our fees compare to plans like ours? An RFP answers: what would the market offer our plan today? Those sound similar. They are not. Benchmarking data is aggregated, historical, and peer-based. It tells you where you sit within a distribution of arrangements that other plans negotiated at other times under other circumstances.
That is genuinely useful information — it will catch a plan that has drifted materially out of range, and it does so quickly and with minimal disruption. What it cannot do is tell you what a specific provider would commit to, in writing, for your plan, at your current headcount and asset level, with your service requirements, right now. Only asking produces that answer.
Why the distinction has sharpened
Plan review activity is running at unusually high levels. Recent data suggests roughly a quarter of plan sponsors expect to conduct a recordkeeper search in the coming year, with more than half planning some form of benchmarking review — and a meaningful share of reviewing sponsors seriously considering a change.
Several forces converged to produce that:
• Recordkeeper consolidation. Providers are merging, exiting, and being acquired. Sponsors are being migrated to platforms they never evaluated.
• SECURE 2.0 operational complexity. Providers absorbed the changes at different paces and with different levels of support.
• Fee compression. Pricing that was defensible several years ago may sit above current market.
• Expanded evaluation criteria. Cybersecurity posture, data accessibility, participant experience, and PEP support now factor into decisions that used to turn primarily on price. That last point is important for the benchmarking question. Fee benchmarking, by construction, evaluates fees. As the criteria that distinguish providers move beyond price, a fee-only comparison covers a shrinking portion of the decision.
When benchmarking is sufficient
Benchmarking is a reasonable primary tool when:
• The plan is small enough that a full RFP would consume disproportionate committee resources
• A market evaluation was completed recently and nothing material has changed
• The purpose is periodic confirmation rather than a live question about the relationship
• Service quality is strong and no trigger event has occurred In these situations, annual benchmarking keeps the committee informed and the file current at low cost.
When an RFP is warranted
The clearer signal is the presence of a trigger. Common ones:
• Time. Three to five years since the last competitive evaluation is a widely used benchmark, though there is no prescribed interval in ERISA.
• Ownership change. Your provider was acquired, merged, or announced an exit from your market segment.
• Service degradation. Turnover on your service team, missed deadlines, unresolved operational errors.
• Material fee change. A repricing, a new fee category, or a revenue-sharing change.
• Plan change. Significant growth, an acquisition, a demographic shift, or a change in plan design that alters what you need.
• Benchmarking results that raise a question. If your fees sit at the upper end of the range, benchmarking has identified an issue it cannot resolve. Only a market test can. One additional trigger deserves its own mention: a committee that cannot articulate why the current provider is still the right one. That is not a performance problem or a service problem. It is a governance gap, and it is the kind of gap that becomes visible in exactly the circumstances where a committee would prefer it were not.
There is also a governance consideration. An RFP produces something benchmarking does not: a documented record of a competitive process with defined criteria, a comparison set, and a reasoned selection. If a decision is later examined, that record carries weight that a peer-comparison report does not.
The outcome most committees underestimate
A frequent objection to running an RFP is that the committee is satisfied with the incumbent and does not want to signal otherwise. That objection assumes an RFP is a prelude to leaving. Often it is not. Incumbents win competitive searches regularly — sometimes with improved pricing or enhanced service commitments, sometimes on the existing terms because those terms turn out to be strong.
That outcome is the most valuable one available. The committee now has a market-tested, documented basis for continuing a relationship, rather than an assumption that has never been examined. Staying is a fiduciary decision. It warrants the same rigor as changing.
A workable rhythm
For most plans, a sustainable cadence looks like this:
Annually. Benchmark fees and services. Review provider performance against agreed standards. Confirm compensation disclosures are current. Record the review in committee minutes.
Every three to five years, or upon a trigger. Conduct a full competitive evaluation with criteria defined before proposals are reviewed.
Continuously. Monitor for trigger events. Provider consolidation in particular tends to arrive without warning. Some practitioners now argue that provider oversight belongs on the committee agenda every year rather than every few years, given how quickly the market is moving.
That is a defensible position, and it does not require an RFP annually — only that the committee ask, each year, whether the current arrangement remains the right one and record the answer.
Benchmarking and an RFP are not competing options. They are different instruments calibrated to different questions, and a committee that understands the difference will use both — on different schedules, for different purposes. The failure mode is not choosing the wrong tool.
It is choosing the more convenient tool without asking what you were trying to learn. A committee that can articulate why it benchmarked instead of going to market, and documented that reasoning, has a defensible process. A committee that benchmarked because it was easier has a habit.
The process is what gets examined. It is worth being deliberate about.
Learn more about Retirement plan provider evaluations services and Vendor benchmarking services.
If your committee cannot name the date of its last competitive evaluation, that is worth establishing before the next benchmarking cycle.
