Tags: Retirement | retirement | bundled plans

Bundled Plans and Your Retirement Planning

By    |   Monday, 15 June 2015 11:22 PM

Whether your company has a bundled retirement plan is not a question that comes up often for the typical employee with a company-sponsored 401(k) plan. But knowing about bundled plans is helpful for rank-and-file account holders who are trying to save and invest for retirement.

Here's a quick rundown on bundled plans and why they should matter to future retirees.

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A bundled plan is basically a retirement plan in which the plan sponsor — your employer — hires just one outside provider to run the entire program, from bookkeeping to investments to legal compliance, according to Ascent Wealth Partners.

The appeal of a one-stop shop is pretty plain. The convenience of having all these varied functions under one roof is undeniable. Your employer has just one organization to deal with for anything and everything related to retirement packages.

The catch is, "that convenience may come at a price," Ascent Wealth Partners said.

That cost that ultimately falls on the employees in the form of assorted transaction fees on their individual 401(k) accounts. Fees can really eat away at a nest egg, according to Consumer Reports.

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Ascent Wealth also reported that conflicts of interest can arise in a bundled arrangement, in which the investment advice is coming from the same people who will be collecting fees for the buying and selling they do in the course of managing the plan.

"As long as they are the benefactors of management fees from the investments they offer, their ability to advise fiduciaries" — meaning the employer and employees — "is compromised," Ascent reported.

The response from plan sponsors and service providers to this problem has been to unbundle, at least partially, peeling off some of the bundled functions and outsourcing some of the functions to outside firms. This way, companies can save money, have more confidence that the financial advice they're getting isn't meant to generate fees that ultimately come out of the future nest eggs of 401(k) plan holders.

Asking the human resources people or other higher-ups at your company is not only well within your rights as an employee, it let's them know you're paying attention to their handling of your retirement.

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Whether your company has a bundled retirement plan is not a question that comes up often for the typical employee with a company-sponsored 401(k) plan. But knowing about bundled plans is helpful for rank-and-file account holders who are trying to save and invest for retirement.
retirement, bundled plans
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2015-22-15
Monday, 15 June 2015 11:22 PM
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