Forty-eight percent of plan sponsors whose retirement plans
are not fully bundled with one vendor indicate they would be open to bundling
the plans if convinced of the benefits, a recent study says. Still, many have
strong reservations about the strategy that would need to be overcome first.
According to Chatham Partners’ report “2011 Trends in DB [Defined Benefit]
Bundling and Total Retirement Outsourcing [TRO]: Evaluating the Opportunity in
a Recovering Economy,” most semi-bundled sponsors agree that cost savings and
efficiency will probably result from bundling. However, many of them, as well
as unbundled plan sponsors, balk at trading off investment flexibility and
adding to their risk. Some of the latter group even doubt that projected
outcomes—such as saving resources, time
and the cost of administrative and investment fees—can even be achieved.
To gain insight about the findings, PLANSPONSOR spoke to
Chatham Partners’ CEO, Peter Starr, who also put them in context. Some plan
sponsors don’t think they can achieve more by bundling their plan packages,
Starr said. “They don’t believe it saves time and resources, their costs, [and]
they don’t believe the benefits outweigh the risks.
“If you track historically, you see the same results—less
than 20% have a strong belief in those outcomes. If you do not believe in those
outcomes, you are less likely to consolidate your program to a single provider.
So if you look at the constituenc[ies] that are truly unbundled [they tend to
stay that way].”
What the study also showed was sponsors’ varying degrees of
satisfaction with their existing plans and desire to improve them. For example,
the greater majority are comfortable with the level of expertise, resources,
cost and time expended in administering their benefit plans. And while 84% of
respondents are not concerned with the current level of expertise, sponsors
most likely cite discomfort with their plan’s cost, and 20% express interest in
Sponsors of the largest plans (more than $500 million in DB
assets) are least comfortable with the resources currently devoted to running
their plans; they also are least concerned with making changes to the level of
expertise and cost. Conversely, sponsors of the smallest plans (less than $50
million) are most comfortable with their resources at hand but least
comfortable with the expertise, cost and time.