As employee benefits consultants, we spend a lot of time helping plan sponsors manage costs, improve employee outcomes, and stay competitive in a tight labor market. But increasingly, our most critical role is helping employers understand and mitigate fiduciary risk.
Nowhere is that risk more underestimated than in traditional benefits procurement. What once passed as “standard practice” is now under intense fiduciary scrutiny. Regulators, plaintiffs’ attorneys, and plan participants are asking tougher questions, and the old ways of selecting vendors and managing benefits are no longer defensible.
The Illusion of Safety in “Business as Usual”
Many employers assume that if they’ve followed a familiar process, issued an RFP every few years, relied on incumbent brokers, and accepted market benchmarking, they’ve fulfilled their fiduciary duty. Unfortunately, that assumption is risky.
Traditional procurement models often prioritize convenience and relationships over process discipline and documented decision-making. From a fiduciary standpoint, that’s a problem. ERISA doesn’t reward good intentions; it rewards prudence, loyalty, and evidence.
Where the Hidden Fiduciary Risks Lurk
Here are some of the most common blind spots we see:
- Conflicted Compensation Structures: Revenue-sharing, overrides, commissions, and indirect payments can quietly influence recommendations. Even when disclosed, fiduciaries must prove they understood the compensation, evaluated its reasonableness, and determined it did not bias decisions. Disclosure alone does not eliminate fiduciary liability.
- Vendor Selection Without Clear Criteria: Selecting vendors based on reputation, longevity, or “who we’ve always used” is not a defensible fiduciary process. Without defined evaluation criteria, scoring methodologies, and documentation, plan sponsors struggle to prove decisions were made in participants’ best interests.
- Infrequent or Superficial Market Testing: Running an RFP every five years, or worse, never, can expose fiduciaries to claims of complacency. Courts increasingly expect ongoing monitoring, not periodic check-the-box exercises.
- Overreliance on Benchmarking: Benchmarking is a tool, not a shield. Being “in line with the market” does not automatically equal reasonable. Fiduciaries must still assess whether fees and services are appropriate for their specific plan and population.
Fiduciary Scrutiny Is No Longer Hypothetical
The rise in ERISA litigation has changed the landscape. Lawsuits are no longer limited to mega plans or egregious abuses. Mid-sized employers are now frequent targets, and procurement decisions are being examined with forensic detail.
Plaintiffs aren’t just asking what decision was made, they’re asking:
- Why was this vendor selected over others?
- How were fees evaluated?
- What conflicts existed, and how were they mitigated?
- Where is the documentation?
If the answers aren’t clear and well-documented, fiduciaries are exposed.
A Smarter, Fiduciary-First Procurement Approach
The good news? These risks are manageable with the right mindset and process. A fiduciary-first procurement strategy includes:
- Transparent and conflict-aware compensation structures
- Objective, documented evaluation frameworks
- Regular, meaningful market reviews
- Ongoing vendor performance monitoring
- Clear alignment between cost, value, and participant outcomes
As consultants, our role is evolving from vendor navigator to fiduciary risk advisor. Employers don’t just need access to the market; they need protection from the hidden risks embedded in how that market operates.
Final Thought
In today’s environment, traditional procurement isn’t merely outdated—it introduces real fiduciary risk. Heightened scrutiny is now the norm, and organizations that succeed will be those that elevate benefits procurement from an administrative exercise to a core fiduciary responsibility. The question is no longer, “Did we follow the usual process?” It’s “Can we clearly demonstrate that every decision was made solely in the best interest of plan participants?” That is the standard—and it continues to rise.