Twenty-two percent of companies are now looking into completely outsourcing their retirement, health and welfare benefits, in an effort to cut costs, a survey by Diversified Investment Advisors. Eleven percent have begun the process of total benefits outsourcing(TBO), Diversified Investment Advisors found.

Thirty-seven percent of those surveyed said that TBO's biggest advantages are lower administrative and recordkeeping costs, and lower internal staffing needs.

"As companies adopt a more holistic, integrated approach to human resources management, the interest in outsourcing has grown, which ultimately benefits both employers and employees," said Eric Henon, a vice president at Diversified. "In addition to being more cost-effective, companies that implement TBO can more easily provide their employees with a total compensation statement that includes detailed information about the status of their retirement, health and welfare benefits along with a summary of their monetary earnings," he added.

Diversified's survey also found that the EGTRRA (Economic Growth and Tax Relief Reconciliation Act) tax credit encouraged higher savings rates, with 62% of defined contribution plan administrators reporting higher levels of participation in their plans and 65% reporting higher contribution levels.

"EGTRRA's impact on stimulating retirement savings comes at a critical time when people need to be more proactive in saving in light of wavering confidence in the future of Social Security and defined benefit plans," Henon said. "Congress should take the necessary steps toward making these EGTRRA enhancements permanent before the expiration in 2011."

Almost 90% of defined benefit plan administrators claim their plan affected their ability to recruit the most skilled employees, with one-quarter of these saying it was a key factor. Ninety-two percent of defined contribution plan administrators claimed their plan has the same impact, while 29% of these said the impact was major.

Ninety-two percent of defined contribution plan sponsors and 93% of defined benefit plan sponsors say their plan affects their capacity to retain the most skilled employees.

As for priorities DC plan administrators have for the coming year, employee education remained at the top of the list for 43% of respondents. A third is considering financial planning in the next year, 33% might add investment options, and 23% will consider consolidating administrative functions for multiple plan types with a single provider.

Reliance on in-house staff continues to be an issue for plan sponsors, because companies fail to optimize the administrative and management resources available to them at plan providers and other external resources. Eighty-six percent of respondents involve their HR department in the administration of their defined contribution plan, with a median number of four full-time equivalents. Slightly more than half of defined contribution plans with under $50 million in assets have less than one full-time employee devoted to plan administration. At the other end of the spectrum, 70% of the largest plans (with at least $500 million in assets) have 20 or more full-time HR staff involved in plan administration.

Monitoring multiple vendor relationships is often an expensive part of defined benefit plan administration, with more than 40% of plan sponsors with at least 25,000 employees using four or more vendors.

"The survey results really point to how much more effective corporations could be in utilizing the expert resources available to them from plan providers and benefits consultants," Henon said. "Whether bundling plan administration, investment services, and actuarial services with a single vendor or consolidating the vendor relationships linked to a company's myriad of plans, corporate plan sponsors can focus their internal HR, legal and finance resources more strategically and achieve significant cost savings at the same time."

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