When it comes to managing a 401k retirement plan, one of the key decisions employers must make is whether to opt for a bundled or unbundled plan. This decision can have implications for the plan's cost, flexibility, support, and can greatly impact the plan's success and its participants' outcomes.
So, what exactly are bundled and unbundled 401k plans?
A bundled plan is a retirement plan in which all services are provided by a single service provider. This service provider takes care of all aspects of the plan, including record-keeping, compliance testing, and other administrative tasks.
On the other hand, an unbundled plan involves selecting separate service providers for each of the plan's components. For instance, employers may choose one provider for record-keeping, another for investment management, and yet another for compliance testing.
Should you opt for a bundled or unbundled plan? The answer largely depends on your company's unique needs and goals.
Here are some key considerations to keep in mind:
Cost:
One of the primary benefits of a bundled plan is that it may involve lower costs than an unbundled plan, as the provider can offer more economies of scale and better pricing due to the centralized nature of the plan. In contrast, an unbundled plan may require paying multiple service providers, which potentially can add up to higher fees.
Flexibility:
Unbundled plans offer greater flexibility as employers can choose different providers for different plan components, giving them greater control over the plan’s service providers. Bundled plans, however, can be less flexible, as they can offer a limited selection of investment options and other plan features.
Support:
Bundled plans hit the “easy button” as all plan components are handled by a single provider. In contrast, unbundled plans may require coordinating with multiple providers, which can be more time-consuming and complicated.
In conclusion, the decision to choose a bundled or unbundled 401k plan largely depends on the unique needs and goals of your company.
While bundled plans may offer lower costs and the “easy button”, unbundled plans offer greater flexibility and control.
Ultimately, the best plan is one that aligns with your company's objectives and provides the greatest benefit to your employees.
Not sure what to choose? We can help! Reach out to the office direct @ (626) 224-7715 or mneeley@equity401k.com to schedule a call.