Sonia Mak, a partner with Borden Ladner Gervais, LLP, identifies key considerations for administrators of pension and benefits plans that help to evaluate potential outsourcing partners. The weight each point carries will vary with the nature of the mandate and the expectations of the administrator.
Skill set: Just because a provider receives rave reviews for its administrative services for a particular type of plan doesn’t mean it has the knowledge or experience to handle all types and sizes of plans. The administrator should investigate and ensure that the provider has the required expertise and experience to handle a specific plan’s business. Alan Torrie, president and CEO of Morneau Shepell, adds that technology leadership and investment are important—the provider needs the right tools to offer great administration.
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Performance standards: A provider typically commits to a set of standards—regarding responsiveness, for example. A plan administrator should ask what systems and mechanisms the provider has in place to ensure it meets the standards it promised.
Reporting and monitoring: Establish standards for reporting by the provider: frequency, format, venue, etc. Sometimes plan administrators also require providers to deliver periodic compliance certificates. Morneau Shepell points out that there are industry-leading international reporting standards (e.g., Canadian Institute of Chartered accountants, section 5970) that some providers adhere to for third-party reporting.
Cost: It’s important to be clear on upfront, annual, maintenance and any additional fees—what they are, whether there are limits and if they can be imposed or changed by the provider unilaterally. Alain Malaket, senior director, pension and benefits, with George Weston Ltd., emphasizes the need for “flexibility” in pricing, so that the plan isn’t charged for every single minor change and has some certainty regarding cost.
Team: The provider’s team will frequently interact with employees, so it’s important to identify the point person, as well as his or her backup and other team members. What is the provider’s turnover rate? Best results are achieved when the provider’s culture meshes with that of the employer’s.
Accountability: The provider’s standard contract often contains monetary limits on liability—and it may be difficult for the administrator to negotiate out of them. However, it’s important to understand what those limits are and whether they are realistic.
Contract: A provider’s contract template may—not surprisingly—be one-sided in favour of the provider. The contract governs the relationship, so it’s essential for the administrator to determine whether there is any room to negotiate and, if not, whether the terms are ones the administrator can live with.
Termination: Even the best relationship will end, so a workable termination process—specifically the termination mechanism and transition process—must be in place.