Bundled defined benefit and total retirement outsourcing opportunities remain a strategically viable market for service providers over the next five years, provided plan sponsors are properly briefed on the advantages, according to a Chatham Partners survey.
Based on the responses of 248 plan executives and 50 consultants, 16% of defined benefit plans that are now not bundled indicate an intention to bundle some or all of their DB plan services in the next 12 to 24 months. Meanwhile, 50% of plans that are not fully bundled said they would be open to fully bundling their retirement plans if convinced of the benefits.
In addition, the survey predicts the sustained adoption of bundling will drive the assets of bundled plans to exceed $1.1 trillion by 2016, from $900 billion in 2013.
“Our data shows that for the first time the majority of DB sponsors have adopted bundled service structures,” said Joshua Dietch, a managing director at Chatham Partners, in a news release about the survey. “Growth has occurred as the absolute number of plans is in decline and the plans that remain are aggressively implementing derisking strategies, be it through plan design or investment solutions.”
Executives at many of the semibundled plans agree time and resource savings, along with lower administrative fees are likely outcomes of bundling, according to the survey. However, along with those that have no bundled services, they are unwilling to sacrifice investment flexibility to achieve these outcomes.