Bundling Up a DB Plan

If you watch television around the holidays, you’re bound to come across one of the best (IMO) holiday movies ever made – A Christmas Story. One of my favorite parts is when Ralph’s mom gets his brother and him ready to go out and play in the snow. He was so bundled up that he could barely move.

Ralph’s mom definitely bought into the idea of bundling. Do you see where I’m heading?  Yes, I want to talk about the benefits of bundling when it comes to defined benefit (DB) plans. (Wow, right?)

Bundling a DB plan means hiring a single service provider to handle many of the functions associated with running the plan, including:

  • Administrative services/recordkeeping
  • Actuarial services
  • Investment management
  • Trustee/custodial
  • Participant services (web, call center, statements)


According to a study done by Chatham Partners, approximately 79% of DB plan sponsors today are currently either unbundled or semi-bundled.[1]  This often results in juggling administrative processes among providers—and that can be more costly and less efficient than a bundled approach.

Advantages to choosing an integrated, bundled arrangement include:

  • Enhanced administrative oversight. By collaborating with one service provider, it’s easier for a plan sponsor to stay on top of plan issues.
  • Cost savings. Fewer service providers typically means less overhead. A single provider can spread overhead across a larger client base and multiple services.
  • Time savings. Coordinating processes through one contact saves a DB plan sponsor valuable time.
  • Responsiveness. Fewer handoffs lead to faster turnarounds.
  • Accuracy. Using a consistent system — with a single source of data — means less chance for errors.
  • Employee appreciation. Increased awareness of the plan sponsor’s entire retirement program.

But one of the most important advantages a plan sponsor can obtain through bundling their DB plan services is gaining access to a professional data management system.  Today, many unbundled plan sponsors are managing their plan by maintaining participant data on their own.  This often leads to significant challenges and fiduciary risk when it comes time to calculate a participant’s retirement benefit.

In my next post, I’ll expand on these issues, including why a bundled approach may be even more compelling after the passage of the Pension Protection Act.  In the meantime, stay warm!

In addition to blogging here, I also tweet regularly about DB topics of interest. Click to follow me on Twitter- @scottruba.

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Affiliation Disclosures

Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.


[1] Chatham Partners: 2011 Trends in DB Bundling and Total Retirement Outsourcing