Whether to use bundled or unbundled service providers is an important decision for your retirement plan. A fully bundled arrangement provides an easy, one-stop shop for services, while unbundling separates functions and uses a third-party administrator (TPA), distinct from the recordkeeper. While there is no right or wrong answer to this question, weighing the advantages of each option against the needs of the organization is essential.
The Benefits of Bundling
Convenience and simplicity. Often less complicated than dealing with multiple vendors, bundling may be a better choice when convenience is key. Bundling offers a comprehensive all-in-one solution, which can make it a more efficient and easier-to-manage option for many businesses.
Cost-effectiveness. Organizations can realize significant savings by bundling services when the cost of administrative and recordkeeping services is offset by management fees. But this is not always the case, so be sure to compare the “all in” costs when deciding.
Time savings. With a bundled arrangement, you do not have to take time to research and engage multiple providers since all services are consolidated under one umbrella. And you never need to spend time figuring out who to call when you have concerns about your plan — you will have a single point of contact for all your questions.
The Upside of Unbundling
Greater flexibility and choice. Bundled providers do not allow you to select experts for each service individually, while unbundling gives you the freedom to choose the ones best suited to your organization’s particular needs. A bundled provider may be strong in one area, but not perform across all services equally. While engaging vendors independently can involve a bit more work, you may find doing so well worth the time and effort.
More complex and customizable plan design. Third-party administrators generally have a greater capacity to craft a plan tailored to meet an organization’s specific goals — one that can better adapt to changing business conditions while complying with regulatory requirements. A TPA made-to-order plan can be particularly helpful when an employer’s needs are more complex and require more sophisticated plan design features. Bundled providers, on the other hand, may use more of a boilerplate approach, resulting in a plan that doesn’t fully align with all business objectives.
Increased agility. Even if you think the approach you have settled on is ideally suited to your needs, those needs may change over time. Or you may discover that an aspect of the overall service fails to meet expectations. With an unbundled arrangement, you can change up individual providers as needed, without having to upend your plan and start over from scratch, enabling an organization to be nimbler.
While the trend has been decidedly in favor of unbundling services in recent years, particularly among larger plans, which arrangement works best varies depending on the organization. Choose the option that provides the flexibility and customization — or ease and convenience — best suited to your situation.