With the number of active defined benefit (DB) plans dwindling, it makes one wonder if DB administration providers are investing in updates, enhancements or improvements to their offerings.
Monica Gallagher, a Jacksonville-based partner responsible for October Three’s DB administration services, says, “There’s no question the provider space for DB plans has shrunk.” She explains that in the early 70s into the 80s, there were best in class providers and plan sponsors could pick someone who could do something excellent. Then there was a wave of total retirement outsourcing (TRO), but plan sponsors found it hard to find a provider good at all types of retirement plans. Some big companies got out of the DB business; they had to choose where to invest their technology.
But, Gallagher says the providers dedicated to the DB space are making innovations. She notes that even sponsors of frozen plans have responsibilities to participants.
Richard Sych, president and consulting actuary, Hooker & Holcombe, who also is based in West Hartford, Connecticut, says it depends on the provider and which market in the DB space they service. “We service the small to mid-sized plan market, and we’ve actually been growing,” he says. He notes that Hooker & Holcombe gets new business from larger providers, because once a plan is hard frozen, it doesn’t need as much attention, so it makes more sense to move the client to a firm that serves small to mid-size plans.
Timothy Ryor, SVP and practice lead, actuarial services, Hooker & Holcombe, who is based in West Hartford, Connecticut, says providers to large plans are not getting out of business, but they are focusing efforts on larger clients. “So smaller clients are getting under-serviced. We’ve been successful in offering solutions and lower fees to them.”
Ryor adds, “One of the trends we are seeing is a move to pension outsourcing, where plan sponsors turn over administration from human resources." He explains that human resources (HR) professionals that had a background in DB administration are retiring, and generally new HR employees are not getting up to speed. NEXT: DB providers investing in enhancements