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October 13, 2004 at 08:00 PM
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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.
