If you have been following our blog for some time, you have heard us talk about the single vs. multi-vendor arrangements available to 403(b) plans. This option is unique to 403(b) plans and can cause uncertainty when employers are establishing a plan for their organization. How do you know which setup works best for your 403(b)?
Luckily for employers, there is no right or wrong answer to this question. The decision on which setup you choose comes down to what works best for your plan and which arrangement will best benefit the plan’s participants. To help with this, we are sharing a deeper look at single vs. multi-vendor plan designs.
Having a single vendor for your retirement plan is simply that; one provider offering investments to eligible employees. This arrangement creates an exclusive relationship between the plan and the investment provider they choose. The design also simplifies the investment process for both the plan and the participants. This arrangement is often used by start-ups, small-sized organizations who are looking to avoid adding a complex design to their plan. You would also see this option in large retirement plans due to the investment firm only working in an exclusive arrangement i.e. Public College/Universities. Having a single provider is also appealing to organizations who don’t want to overwhelm employees with choice, are limited on resources to manage those enrolling in the plan and companies who are conscious of budget.
While a single vendor arrangement does reduce the complex makeup of the retirement plan, it does not necessarily reduce the administrate responsibility for the plan sponsor. This is why single vendor 403(b) plans are using third party administrators like ADMIN Partners to help them maintain their plan’s compliance.
While the simplicity of a single vendor setup works for some employers, the option of adding additional investment providers to the plan’s lineup is an appealing feature of the 403(b) plan design. One of the biggest draws to this arrangement is the ability to offer eligible employees choice in terms of their investments. In a multi-vendor structure, a 403(b) plan will have two or more investment providers available in the plan. This setup is often seen in public education plans.
A multi-vendor 403(b) plan does provide investment choice, but this unique structure also includes an added level of responsibility when it comes to the administration of the plan. From data aggregation across vendors to additional obligations around contributions, having multiple vendors increases the complexity to the compliance aspect of retirement planning. Luckily, a TPA like ADMIN can ease the burden of these added responsibilities and ensure the plan – regardless of the number of vendors – remains compliant.
As an independent TPA, ADMIN Partners has a solution that fits both single and multi-vendor arrangements. If you have any additional questions regarding these options and which will benefit your retirement plan, contact us at 877-484-4400!