Benefits January 1, 2008

DBSummit07: The Outsourcing Dilemma

Increasing complexity of defined benefit plan administration brought on by new regulations is leading sponsors to take a new look at outsourcing solutions.
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align=”center”> Audio Recordings of the 2007 DB Summit Are Available Here

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During a panel discussion at PLANSPONSOR’s DBSummit in, D.C., Gary Burczek, Actuary at The Principal Financial Group, said the total time savings for plan sponsors, administrative and otherwise, is a strong driver for outsourcing and bundling. The actuarial and investment expertise gained from outsourcing is another factor, Burczek added.

Burczek pointed out sponsoring a DB plan includes the responsibilities of:

  • plan administration,
  • actuarial valuations,
  • recordkeeping,
  • custody of assets,
  • trusteeing the plan, and
  • investment management for plan assets.

Sponsors can choose a fully bundled solution for these responsibilities, a fully unbundled solution, or something in between. Sponsors can also bundle all DB duties with defined contribution and non-qualified plan tasks in one solution.

Ed Ryan, SVP, Total Retirement Services, Diversified Investment Advisors, noted that sponsors are starting to move from fully bundled solutions to a separation of investment providers and administration providers. Caitlin Long, Morgan Stanley, told audience members that outsourcing investment management offers a greater ability to respond “real time” to market changes.

Outsourcing DB plan functions allows sponsors to act more strategically, teeing up strategic plan design and investment decisions to service providers, said Ryan.

Before searching for outsourcing providers, Burczek said, sponsors must first determine the split between functions they will keep in-house, and functions that will best be performed by service providers. Sponsors should look for providers that understand the services they will perform and that have the best technology to perform those functions.

Ryan suggested sponsors use retirement plan advisors with experience in searching for DB plan providers. Advisors can also monitor providers and make fund selections to protect against conflicts of interest, he noted.

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