Bundling seems to be what 401(k) plan sponsors are ordering for the retirement plan market. Typically, sponsors use different providers to administer their 401(k) and defined benefit plans. But recent reports suggest that may soon change as sponsors look to cut costs and bundle up both plans together to offer a one-stop plan shop, now known as total retirement outsourcing, or TRO.

TRO is increasing in popularity in the mid-size plan market, which ranges from $25 million to $500 million. Under a typical TRO, a plan sponsor's 401(k) and defined benefit plan are offered separately but are offered by one provider. TRO providers such as Diversified Investment Advisors Inc., Fidelity Investments, Massachusetts Mutual Life Insurance Co., Prudential Financial Inc. and New York Life Insurance Co. have already found favor with sponsors.

The main drivers behind TRO may be cost savings, but plan participants have a lot to gain, as well.

It is true that 401(k) plans are typically sold as bundled, about 95% of defined benefit plans are unbundled. Now, the bundling of defined contribution and defined benefit plans under one provider often leads to higher contribution rates and, therefore, more assets under management.

Another major change sweeping the retirement plan market is that 401(k) plan sponsors are embracing third-party administrators, or TPAs, according to a study by Brightwork Partners. TPAs combine the recordkeeping function of plan providers with the investment advisor services of registered investment advisors, and are proving to be competitors to national bundled 401(k) plan providers.

TPAs are targeting the small-size plan market, which is underserved by national providers. "The availability and affordability of [recordkeeping] technology has lessened the advantage that large firms have in regards to proprietary technology," said Ron Bush, a principal with Brightwork. He said national vendors no longer enjoy the cost advantage as their over head costs are generally higher then those of TPAs.

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