The Minster Machine Co.
PLANSPONSOR PATHFINDER Case Study
Not too long ago , a small to medium-size 401(k) plan had to pretty much accept what providers were offering it in terms of fees and services. Such plans had little or no leverage, and many providers simply did not offer competitive programs at the lower range of the market.
What a difference a few years make.
Competition and technological advance have spurred providers to offer previously unheard of service and fee packages to small plans.
The seismic shift in the market is illustrated by the case of The Minster Machine Company. The Ohio-based privately held manufacturer features a $20 million 401(k) plan with 515 participants.
"We wanted more reliable
and lower fees and better
Minster had a traditional problem: Its incumbent provider was not performing up to expectations, and it wanted a change. "The employee base was dissatisfied with performance," said Leslie Noll, Minster's manager of Compensation & Benefits. There were customer service concerns, too, as mergers had led to turnover in the incumbent's customer service staff. The company’s retirement committee decided to act.
Yet, Minster faced the same dilemma that plagues other small plans: It wanted a change, but could it do any better? Minster was not a $200 million plan that could use its size to negotiate better fees and services.
Mindful of the challenges, Minster went out to see what the market had to offer. “We wanted more reliable investment performance and lower fees and better service,” said Noll.
In its quest to find a provider who could meet these requirements—on terms that were efficient for Minster—the company turned to PLANSPONSOR Pathfinder, the search service of PLANSPONSOR. Noll was aware of Pathfinder via the PLANSPONSOR.com Web site.
Minster began the search in March 2003 and finished in October of that year. Implementation began in November with a conversion date of February 1, 2004. The search was seven months from start to selection.
“Pathfinder helped us. There was no way we could have gathered that amount of data to get to the shortlist of providers we needed on our own,” said Noll. “[As a relatively small company,] we don’t have the specialty and expertise in-house to do these activities on our own. By the same token, we wanted to make sure we provided our employees with a quality provider.”
Rounding out the Minster search team with Noll were Bob Sudhoff and Steve Kill, vice president of Finance and vice president of Human Resources, respectively.
Noll said Pathfinder’s ability to document the search process was an added benefit: “We take our fiduciary role very seriously, and we wanted to make the best possible decision for our participants. We also wanted to have our decision well-documented from both a quantitative and a qualitative standpoint.”
She said that using a service with PLANSPONSOR Pathfinder’s profile was a plus for a small plan like Minster’s. “Having a well-known, reputable firm like PLANSPONSOR Pathfinder involved showed that we were serious about getting a fair offer,” she said.
“We take our fiduciary role very seriously,
and we wanted to make the best possible
decision for our participants"
Minster ultimately chose T. Rowe Price to be its new provider. “They had consistent long-term performance of funds, lower expense ratios, lower loan fees, and lower per participant annual fees,” said Noll. “We also were impressed with their reputation and the services they provide to employees. We felt we would get a higher degree of service and attention from T. Rowe because we were so closely aligned with their target market.”
T. Rowe also offered services that would relieve plan administrators like Noll of some of the time-consuming burdens of administering the plan—freeing them up for more productive activities.
“We’re excited about partnering with T. Rowe to offer more automated services to our participants. Moving to paperless transactions, for example, will save time and money for employees and Minster,” said Noll. “T. Rowe also was able to provide a service package that took care of a host of plan functions, such as loan withdrawals and salary deferral changes that previously were initiated and approved through Human Resources.”
“Almost all 401(k) transactions will be handled solely by the T. Rowe customer service center, as well as all the ancillary paperwork around those inquiries,” she said. “This leaves Minster’s Human Resources Department more time to do value-added activities for employees,” said Noll. “We want to be able to offer a quality program to our employees without being administratively overwhelmed with paperwork.” A small retirement plan with limited resources couldn’t ask for more.