TRO Brings Unexpected Benefits

March 26, 2003 ( - Plan sponsors that have opted to pursue total retirement outsourcing (TRO) are reaping benefits, but not necessarily the ones they expected, according to a new study.

In a recent study of some 307 plan sponsors by PLANSPONSOR and MassMutual Retirement Services found that while ease of dealing with one provider was most frequently cited as the deciding factor in choosing a provider (27.1%), nearly a quarter (22.9%) cited cost savings, and just 14.6% cited expanded participant services. Roughly 6.3% each cited expanded plan sponsor services, accountability, or technological efficiency.

Unexpected Benefits

Asked how TRO has impacted their organization, most said that both headcount (61%) and investment expense (61%) had stayed the same, but a majority (58.5%) said that participant satisfaction had increased. About a third (34.1%) said that administrative expenses had decreased, but 36.6% said costs were steady, and 29.3% actually said expenses had increased. Nearly a third (29.3%) said that investment expense had decreased as a result.

Not surprisingly given those results, more than two-thirds were either quite or extremely satisfied with their TRO arrangement.

Not Yet?

Still, not only did the vast majority of survey respondents (86.6%) not currently have a total retirement outsourcing (TRO) arrangement, most of those (81.5%) said their organization hasn’t even considered TRO – at least not yet. Among those who had considered TRO, but not embraced it:

  • 56.5% said they did not want to give that much responsibility to one provider,
  • 45.7% said it was too costly, and
  • 34.8% just haven’t made a commitment yet.

Nearly a third (32.6%) said they couldn’t justify the disruption caused by switching.

Among employer respondents that have not yet considered TRO, nearly half (46.4%) said they weren’t interested in consolidating services. Suggesting that providers still have some work to do, one in five were not aware of the benefits of TRO, while 14.2% said they want to “wait and see” how TRO works for others, according to the survey.