How to Determine Whether a Bundled Retirement Plan Still Makes Sense for Your Business

When establishing a retirement plan, business owners are often presented with two different service models: “bundled” and “unbundled” solutions. While each approach can be effective, the right choice depends largely on the goals of the business, the complexity of the plan, and the level of flexibility needed.

The reality is that there is no universal “best” solution. What works well for one business may be unnecessary for another.

What Is a Bundled Retirement Plan?

A bundled retirement plan combines multiple services under a single provider. Recordkeeping, administration, participant support, and investment management may all be coordinated through one organization. For purposes of this article, however, we will focus specifically on the bundling of recordkeeping and administration services, as these are often the primary considerations when evaluating bundled versus unbundled plan structures.

For many start-up and smaller plans, this can be an attractive option. Bundled providers often offer lower initial costs, streamlined administration, and a straightforward implementation process. Business owners can typically work with fewer points of contact, reducing the amount of coordination required between multiple vendors.

For employers who simply want to offer a quality retirement benefit and are not focused on advanced plan design strategies, a bundled solution may be more than sufficient.

What Is an Unbundled Retirement Plan?

An unbundled retirement plan separates various service functions among specialized providers. For example, one company may serve as the recordkeeper, and the other as the Third-Party Administrator (TPA).

This structure can provide greater flexibility and customization. Plan Sponsors have the ability to select providers based on their specific expertise rather than accepting a one-size-fits-all arrangement. Unbundled solutions are often utilized by businesses seeking more advanced plan design strategies.

When Bundled Solutions Often Make Sense

Many new retirement plans do not require complex plan design features. If a business owner’s primary objective is simply to establish a retirement plan and provide a benefit to employees, a bundled provider can be a practical and cost-effective solution.

Bundled arrangements may be particularly appropriate when:

• The plan is newly established.
• Participant counts are relatively small.
• Owners are not seeking to maximize retirement contributions through advanced plan design techniques.
• Administrative simplicity is a top priority.

In these situations, the additional flexibility offered by an unbundled arrangement may not provide enough value to justify the higher cost.

When Unbundling May Become More Attractive

As businesses grow, retirement plan objectives often evolve.

Business owners may begin looking for ways to increase tax-deferred savings, improve employee retention, attract talent, or implement more sophisticated contribution strategies. At that point, the limitations of certain bundled arrangements can become more apparent.

An unbundled approach may be worth considering when:

• Owners want to maximize retirement contributions.
• The business is exploring advanced profit-sharing or cash balance plan strategies.
• The plan has grown significantly in assets or participants.
• The employer wants the ability to select best-in-class providers for specific services.

The increased flexibility of an unbundled structure can help align the retirement plan more closely with the long-term objectives of the business.

The Good News: This Isn’t a Permanent Decision

One common misconception is that selecting a bundled provider locks a business into that structure indefinitely. In reality, retirement plans can evolve over time.

Many successful plans begin with a bundled provider because it is the most practical solution for their current needs. As the business grows and objectives change, portions of the plan can be unbundled and transitioned to specialized providers with minimal disruption to participants and day-to-day plan operations.

The decision does not need to be viewed as all-or-nothing. A retirement plan should be evaluated based on where the business is today while maintaining the flexibility to adapt as future needs arise.

Final Thoughts

The question is not whether bundled or unbundled retirement plans are inherently better. The question is which structure best supports the goals of your business today.

For some employers, a bundled provider offers an efficient and cost-effective way to deliver retirement benefits. For others, the flexibility of an unbundled arrangement may create opportunities that justify the additional complexity and cost.

The most effective retirement plan structure is one that aligns with your business objectives, supports your employees, and has the flexibility to grow alongside your organization.