May 8, 2009 (PLANSPONSOR.com) - The move toward
bundling of defined benefit plan services may have run its
course, according to a new survey.
Only 6% of plan sponsors with unbundled defined benefit
(DB) plans intend to bundle any of their plan's DB services
in the next two years, compared to 14% in 2005, according
to Chatham Partners, which has conducted four research
studies assessing the trend toward outsourcing and bundling
benefit plan components since 2001.
According to an announcement, the most recent study,
released earlier this month, entitled "The Long March:
Strategies to Accelerate Growth in the Retirement
Outsourcing Market", reveals that the retirement
outsourcing market has not turned the corner toward a
period of rapid adoption of bundling. However, Chatham says
that the bundled retirement outsourcing growth
opportunities remain for retirement plan providers willing
to refine their marketing, sales, and product development
efforts to align with plan sponsors' evolving needs.
According to the report, regardless of their bundling
status, plan sponsors are increasingly "comfortable" with
the cost, time, and resources associated with administering
their benefit plans. In 2005, 68% of plan sponsors reported
"comfort" in these areas versus 77% in 2008.
Providers have made progress convincing plan sponsors
who were already receptive to bundling about certain
benefits associated with bundling. For example, both
semi-bundled and fully bundled / TRO / TBO respondents are
more likely to agree in 2008 that bundling saves time and
resources (56% vs. 34% in 2005 and 74% vs. 62% in 2005,
respectively), according to the report.
While cost savings and efficiency remain the most
important reasons sponsors give for bundling in 2008
(mentioned as the most important reason for bundling by 39%
and 17% of sponsors, respectively), other key reasons vary
by a plan's bundled status. For example, fully bundled
plans place great value on having a single point of
contact, while semi-bundled plans place much greater
emphasis on the opportunity to improve participant
services, according to the report.