Choosing a service provider for any health or welfare benefit plan is a significant responsibility and requires analysis not only of company needs but of the marketplace. The PLANSPONSOR Plan Administration Guide, Part 1, offers insight into the provider marketplace for defined benefit (DB) plan, stock plan and health savings account (HSA) administration. Defined contribution (DC) plan providers will be covered in the annual recordkeeping survey, in the next issue.
How you choose to service these benefit plans, which are generally supplementary to a DC plan, can be a strategic question. Do you value simplicity with one provider handling it all, or do you want a top-shelf approach to each product, where you invest the time to research points of differentiation and choose three unique providers? In general, says Managing Director of Retirement Robyn Credico of Willis Towers Watson, outside Washington, D.C., less than a third of large employers bundle their plans with one provider. This seems to match the experience of the largest retirement recordkeeper: As of March, year-to-date, 29.7% of Fidelity clients have more than one plan or product on their platform.
There are many advantages to having your plans serviced by the same provider, or what is considered a “bundled” plan, according to Sangeeta Moorjani, head of workplace investing product, marketing and advice for Fidelity in Boston. “The big bold word is ‘integration.’ We know how hectic life is for employers and employees and how important the benefit is for having one single experience for the end employee.” Moorjani describes one portal through which plan sponsors and employees can engage with Fidelity, one service team to handle most of a client’s—excluding stock plans’—needs, one comprehensive view of benefits accounts in real time, and one place that lists actions participants can take.
In contrast, Credico describes working with separate providers for each benefit plan as a “best of breed” approach, from an administrative perspective. “Many DC providers got out of the DB business and the health and welfare business because delivering those services takes a different skill set,” she says. “We would argue that plan sponsors should find the best administration solutions and then use a portal to integrate the plans for participants.” Using separate providers at the plan level does not preclude participants from having an integrated view, however, she says, because for several years providers have shared account information with each other, to give participants a full-view retirement picture.
To Moorjani, “The true benefit of integrated plans is that participants get help with decisions that drive better outcomes. If we see a participant researching debt consolidation on the Fidelity site, we can go beyond and offer him a budget calculator or specific content on the topic. We get to know the individual and go to a personal level in order to be more relevant to him.”
Another challenge in the bundled environment can be what to do if the strategy fails to work out, Credico says. “If you don’t like a provider and want to find a new one, undoing an integrated solution is very difficult. It’s much easier changing your DC provider than it is your DB provider.” —Judy Faust Hartnett