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Some employers still offer defined benefit retirement plans along with defined contribution plans.

One way for benefits advisors to help those employers is to recommend “total retirement outsourcing,” or a move to put a single vendor in charge of both types of plans. The TRO trend started at midsize employers and is becoming more common at bigger plans.

TRO is here now because of advances in technology. Thanks to the Internet, vendors can offer flexible, standards-based systems and let sponsors change plan components without doing a costly, time-consuming overhaul of the underlying record-keeping. User-friendly systems also reduce customer service call center costs by reducing participant confusion.

Economies of scale ought to make a good TRO arrangement at least 15% cheaper than handling administration in-house, and somewhat cheaper than contracting with several different providers. This is because TRO solutions offered by large service providers can achieve economies of scale. It doesnt matter whether the plans they handle are large or small, because the same system is used to service many plan sponsor clients.

Employees like good TRO programs because they understand the benefits: Getting the information from one vendor system is easier than obtaining it from several different vendor systems.

Of course, any organization that entrusts all of its retirement plans to one vendor needs to make certain that the provider is reputable and focused on customer service.

Consider the following strategies when helping employers select TRO providers:

Understand the key objectives for outsourcing and the range of services that the TRO vendor will provide.

Make certain that the vendors technology is flexible enough to meet the stated goals.

Schedule a field trip. to see how the providers operation works and to meet with customer service reps.

Verify that the vendor offers a broad range of investment vehicles and access to non-proprietary funds.

Arrange for plan participants to get training and access to real-time information.

is vice president, retirement plan services, for Ceridian Corp., Minneapolis, a human resources solutions company.


Reproduced from National Underwriter Edition, October 14, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.