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You just finished the torture of the RFP process for a new vendor for your benefit plan (doesn’t matter what kind of plan – 401(k), group health plan, section 125 plan, stock purchase, etc.). You carefully compiled all the information from the 100-page responses, checked the references, asked pointed questions during the in-person interviews and guided the committee through the final vendor choice. After several months of work, you’re ready to begin your new partnership. Congratulations! Let’s get going.

But, wait! Your vendor sends you its multi-part services agreement. You’ve really had it with the whole process by now and you’re tempted to just sign it and send it back that day. You think – these are all standard documents anyway, aren’t they? Think again! They are only standard documents if you sign the first version the vendor offers to you.

It’s really important to compare the written agreement with everything proposed to you – whether in the original proposal or as revised after negotiation. Does the agreement formally commit to give you/your plan everything promised? What about the timetables for implementation and providing routine services – are those spelled out clearly?

And we lawyers have to think about what happens when things go wrong. What if you’re not happy with how the vendor performs and need to hold its feet to the fire? Is there an appropriate enforcement mechanism? What are the procedures for termination of the agreement?

When your employees’ benefits are involved and errors are made, there always is a chance that unhappy employees will turn their anger toward you. Will the vendor indemnify you for any claims? What if those errors involve security or employee personal identity breaches? Is there liability insurance in place to cover any of these claims? With what limits?

If the relationship totally deteriorates, is a lawsuit in order? In what venue (i.e., where may you bring the suit)? Or will the agreement provide for “alternative dispute resolution” like arbitration or mediation? What state’s law will govern those pesky contractual issues? All of these issues and others need to be addressed in the agreement.

But let’s also focus on you holding up your end of the contract. Are you ready for the implementation? Have you devoted or hired sufficient human resources/ benefits personnel or consultants? Is your IT department on board for the various programming, reports and testing that inevitably will be required?

Those contractual “hold their feet to the fire” clauses usually work in both directions, i.e., bind the vendor and the employer. It’s vital to a successful vendor relationship for the employer to be geared up to go through the pain of change on the way to wonderful new service for your benefit plan. Make sure you’re ready.

Upcoming Stearns Weaver Miller Webinar:

Please join Robert  S. Turk, Chair of our Labor & Employment Group, for a one-hour webinar “Preparing for U.S. DOL’s New Salary Rules on Exempt Status,” on December 9th. Click here for more information or to register.