Bundling Trend Running Out of Steam?

May 8, 2009 ( - The move toward bundling of defined benefit plan services may have run its course, according to a new survey.

By Nevin E. Adams | May 08, 2009
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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.

"Comfort" Zones

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.