1. Does the payment method create a potential conflict of interest? If thevendor is selling a product other than the education program itself, HR mustensure that the vendor’s goals and objectives are not at odds with theobjectives of the employer and its employees. “Payment based on commissionsmay be acceptable,” Scarborough says, “but the employer may assume someliability if it has not exercised care in knowing the vendor’s interests inproviding the education program.”
2. Is the education program tailored to the plan? “The education programmust address the plan’s specific investment options and contribution limits,”Scarborough says. “If the vendor tailors the education program to the 401(k)plan, the employer is in a more defensible position with respect to fiduciaryliability.”
3. Does the program include a range of delivery methods? “Employers reducetheir liability dramatically when they offer the full spectrum of deliverymethods,” Scarborough notes. Offer online options, written materials, and oralpresentations so employees can choose what works best for them.
4. Does the vendor track changes in the plan and the composition of theworkforce and modify the program to meet new needs? “Vendors should assume theresponsibility for updating the program if, for example, new investment optionsare added or a substantial number of employees are nearing retirement age,”Scarborough notes.
Scarborough advises HR to evaluate the education program at least once ayear. Look for improvements in three primary measures of program effectiveness:participation rates, contribution levels, and the distribution of allocations.Improvements in allocations include lower dependency on company stock or moneymarket funds. “If after one year there is no improvement,” Scarborough says,“explore possible explanations.” For example, has the plan experienced asignificant influx of new employees who might skew the numbers? “If all of therelevant factors have remained roughly constant but there is no visibleimprovement in the key measures of plan success,” he notes, “it would beentirely fair to replace the vendor.”
Workforce, October 2002, pp. 49 -- Subscribe Now!