Should Plan Sponsors Conduct an RFP — or Is Benchmarking Enough?
Should Plan Sponsors Conduct an RFP — or Is Benchmarking Enough?
One of the most common questions plan sponsors ask when evaluating benefit plan service providers is simple:
Do we need to run a full RFP, or is benchmarking sufficient?
The answer is rarely absolute. What matters most is not the specific tool used, but whether the review process is thoughtful, impartial, and defensible.
Why This Question Comes Up So Often
Why This Question Comes Up So Often
Running a formal request for proposal (RFP) can feel disruptive.
Sponsors worry about:
Straining long-standing vendor relationships
Consuming internal resources
Triggering unnecessary change
At the same time, fiduciary responsibility requires sponsors to periodically evaluate whether service providers, fees, and services remain reasonable.
This tension is where the benchmarking versus RFP question emerges.
What Benchmarking Actually Does
Benchmarking compares a provider’s fees and services against market data.
It helps answer questions like:
Are fees within a reasonable range?
Are services aligned with market standards?
Are there meaningful gaps in capabilities?
Benchmarking can provide valuable context — particularly for organizations looking to confirm that an existing arrangement remains competitive.
But benchmarking alone has limitations.
What an RFP Is Designed to Do
A formal RFP process goes deeper.
It allows sponsors to:
Evaluate multiple providers simultaneously
Compare services, pricing, and capabilities directly
Identify innovations or structural differences in the market
Demonstrate an objective evaluation process
In many cases, the greatest value of an RFP is not simply identifying a new provider. It is establishing a documented, defensible process.
When Benchmarking May Be Appropriate
Benchmarking can be a reasonable approach when:
A provider relationship is functioning well
Fees appear broadly aligned with market ranges
Services continue to meet plan needs
A recent comprehensive review has already occurred
In these situations, benchmarking may serve as a periodic validation exercise.
When an RFP Becomes More Important Any change to
A more structured evaluation is often appropriate when:
Fees or compensation structures are unclear
The vendor relationship has not been reviewed in several years
Service issues have surfaced
Regulatory expectations are evolving
Organizational leadership or governance structures change
In these cases, benchmarking may not provide the level of transparency or comparison required.
What Courts and Regulators Focus On
When fiduciary decisions are examined, the question is rarely:
“Did you conduct an RFP?”
Instead, the focus tends to be:
Was the process objective?
Were alternatives considered?
Were fees and services evaluated thoughtfully?
Can the decision be documented and explained?
Both benchmarking and RFPs can support fiduciary oversight — if they are used intentionally.
The Real Goal: A Defensible Evaluation Process
For plan sponsors, the objective is not to run an RFP for its own sake.
The objective is to ensure that service provider decisions are:
Independent
Well-documented
Periodically evaluated
Capable of withstanding scrutiny
Benchmarking and RFPs are simply tools that help support that process.
The Bottom Line
The question is not whether benchmarking or an RFP is inherently better.
The real question is whether the evaluation process behind the decision is clear, impartial, and defensible.
Sponsors who approach vendor oversight with that mindset are far better positioned than those who rely on assumptions or informal reviews.
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