No one would argue that running a defined contribution plan is any simpler than running a defined benefit plan. Some would even contend that a DC plan, with more moving parts and with often hundreds of participants with individual accounts, is a far more complex management proposition than the pooled assets that form a DB plan. So why, one might ask, haven't DC plan sponsors availed themselves of the fiduciary management solution known as outsourcing?
DC plans are often run jointly by HR and treasury departments, and as more assets have flowed into these plans, demands on these department professionals have increased. At the same time, companies have become more aware of the need to provide more investment support to participants. With resources stretched thin, it can be hard to accomplish the current goals of institutionalizing the DC plan, while ensuring that it runs efficiently. Enter DC outsourcing, also known as fiduciary management or outsourced CIO.
P&I brought together two prominent providers of outsourced CIO services to DB and DC plans, along with a DC plan sponsor whose U.S. DC plan moved to a DC fiduciary model in late 2013. The lively conversation covered a wide range of topics including why a DC plan sponsor might want to hire an outsourcing partner, what the difference is between consulting and outsourcing, what benefits a plan sponsor and a participant might see,
what it costs, and the operational and governance considerations.