401(k) providers can deliver either "bundled" or "unbundled" plan administration services. A bundled (or “full-service”) provider delivers all three of the major plan administration services - asset custody, participant recordkeeping, and Third-Party Administration (TPA) - while an unbundled provider allies with at least one other company to deliver all three services. If you’re a business owner, understanding the differences between the two service models can help you choose the best 401(k) provider for you and your employees.
All 401(k) plans require three basic plan administration services:
Bundled 401(k) providers deliver all three services, while unbundled providers deliver only one or two. To deliver all three services, an unbundled provider must ally with at least one other service provider.
A fiduciary-grade investment adviser or a non-fiduciary broker and insurance agent can usually be added to a bundled or unbundled 401(k) provider for professional investment advice.
In general, bundled providers offer lower fees and more straightforward services, while unbundled providers can be more custom or high-touch. Other major differences include:
|
Feature |
Bundled 401(k) Providers |
Unbundled 401(k) Providers |
|
Service model |
One company delivers all three of the major 401(k) administration services. |
Two or more companies ally to deliver all three services. |
|
Price |
Usually cost less. |
Usually cost more due to multiple service providers. |
|
Customer support |
More likely to offer a single point of contact for business owners. |
More likely to have multiple contacts – one for each service provider. |
|
Plan design options |
No difference generally. However, in my experience, 401(k) plans with obscure features (e.g., ESOP, ROBS, or prevailing wage) are most often serviced by unbundled specialists. |
|
|
Financial advisor options |
No difference generally. A fiduciary-grade investment adviser or a non-fiduciary broker and insurance agent can be added to either provider for professional investment advice. |
|
|
In-person meetings |
Not likely for small businesses. |
Often available for a fee. |
Bundled and unbundled 401(k) providers are not inherently better or worse than the other. In fact, each type of 401(k) provider can range from great (competent and consultative services for reasonable prices) to awful (sloppy and/or cookie-cutter services for excessive fees).
My general recommendation when choosing between them - go bundled unless you want a niche plan design or in-person care. Bundled providers are usually less costly and complicated.