From enrollment elections and payroll deductions to pension calculations,
A plan sponsor’s knee-jerk response is often to fire the vendor in question, but that’s not always the best answer. In fact, switching vendors amid unresolved administration woes can be a bit like abandoning ship during a typhoon. Instead, plan sponsors should consider, with the help of their benefits adviser, how they can work together with their vendors to chart a course.
Making waves
When employee complaints escalate up an organization’s chain of command, it’s tempting for HR to place blame on the third-party administrator. But the truth is, there’s usually plenty of accountability to go around. Though it may be a difficult pill to swallow, plan sponsors must consider how their own shortcomings or miscommunications may have contributed to the vendor’s failure to perform.
For instance, plan sponsors have been known to browbeat administrators into bottom-floor pricing that makes it financially impossible to put a vendor’s best resources on the job. Or, they may fail to negotiate meaningful service-level agreements (SLAs), making it difficult to hold administrators financially accountable for poor servicing. Even those that do have material SLAs in place can find it hard to devote enough time to attentively monitor and manage vendor performance.
These realities make it incredibly difficult to walk away from a vendor — no matter how poor its performance — in the middle of a service contract. Winning a breach-of-contract suit is an arduous process that is rarely worth the expense. Both sides will try to place fault on the other, and a plan sponsor’s victory is by no means guaranteed. Even if they manage to win the day, it must still take on the time-consuming process of starting the entire vendor search over again.
A plan sponsor may choose instead to carry on until the end of the unsatisfactory contract while seeking out new potential vendors to engage once the contract expires. Although this approach staves off troublesome legal battles, it requires the plan sponsor to issue a detailed request for proposal and prepare for yet another vendor implementation process. Moreover, plan sponsors run the risk of spending extensive time and resources without effectively eliminating the root cause of the service issues they had in the first place. A new relationship will not improve any issues that stem from the plan sponsor.
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Changing direction
Fortunately, there’s another way to turn around the participant experience without taking a vendor to court or finding a replacement and kicking them to the curb. “Vendor recovery” is an often-overlooked solution that has the potential to salvage the relationship between plan sponsors and benefits administrators while expending the least amount of time and money. In a typical vendor recovery project, both sides agree to allow a third party to perform a top-to-bottom evaluation of the problematic relationship. This assessment can range from reviewing plan documents and processes to performing systems audits, and from analyzing call center recordings to interviewing leaders and staff.
Over the course of reviewing the plan’s setup, processes, data and personnel, a vendor recovery specialist will typically uncover numerous efficiency, accuracy and communication issues that may be negatively impacting the vendor’s performance and, in turn, the participant experience. Some issues — like the occasional failure to track down a beneficiary or deliver a required participant communication — may seem small, but these compliance oversights can trigger significant financial penalties in the event of a plan audit. More insidious problems, like slow or inattentive participant service, may take their toll on an organization’s employee satisfaction rather than its bottom line.
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The vendor recovery process does not end with evaluation. The next step is to develop and implement a mutually beneficial action plan to address the uncovered issues. It also helps to have a concrete measurement process to verify the effectiveness of corrective actions in an unemotional, empirical way. Finally, a vendor recovery specialist can serve as a moderator who facilitates contract renegotiation and ensures the necessary resources and SLAs are put in place to effectively manage vendor performance going forward.
If your client is experiencing issues with its employee benefits administration vendor, encourage them to take a pause before deep-sixing them. Vendor recovery might be the trick to saving the vendor-provider relationship, and it may save time and money as well.
