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  • Writer's pictureMike Monroe

Don’t let the tail wag the dog! The empty value propositions of bundled solutions

Updated: Jan 2, 2023

I explored the 401k employee benefit landscape for many years, prior to launching the Mountain West 401k program. My research included platform demos, conversations with multiple industry providers and survey feedback from over 100 employers. I learned that existing 401k solutions fell short for several reasons. The top reasons for employer dissatisfaction were:


· 401k solution had poor customer service

· 401k solution did not scale in price

· Plan design limitations prevented business from achieving its benefit goals

· Sub-standard fund performance

· Hidden fund fees

· Expense fund ratios

· Expensive service providers

· Difficult and costly set-up

· Payroll integration and user platforms were “oversold” features


The greatest driver of long- term satisfaction was dedicated and responsive customer service. Being able to pick up the phone and speak with experts who work on the retirement program was most desired. This included the ability to contact program administrator representatives directly and to have access to an in-house C-Suite professional to help with plan design, discrimination testing and the overall delivery of the 401k benefit to the participants.


Essentially, employers wanted a “partner” to help them deliver and manage their 401k benefit. The advisor role was not best suited to do this because their expertise lies in investment management not in personnel/staff management.


The other huge driver of long-term satisfaction was ease of set-up and scalability. Bundled solutions tout ease of set-up but I found that these solutions all had set-up costs and offered limited flexibility with plan design and investment choices.


From a fund-line up perspective, I learned that there were often hidden fund fees not disclosed. More important, the limitations in fund choices and requirement to use funds from bundled providers yielded consistently sub-par performance when benchmarked against comparable fund classes. Yikes!


Lastly, the pricing model of bundled solutions didn’t scale. As organizations approached 50 employees and had more than $1m in plan assets, these solutions were no longer competitive from a cost standpoint.


So …. why do employers join bundled solutions in the first place?


Bundled solutions sell ease of administration, payroll integration and participant platforms as core decision making considerations. Ease of administration is certainly important and bundled solutions will tout that they simplify administration through a pre built plan design, fund line-up, and payroll integration features. In practice, however, these features did not make administration more simple.


Time savings associated with payroll integration was dwarfed by the additional time spent on setting up the integration. Further, a pre built plan design with a limited fund line-up has the potential to create staff management issues when navigating expectations around employee contributions and fund performance. A bundled solution will not assume management functions like obtaining insurance, bonds and reviewing investments, and tracking down service professionals to help address issues and inquires.


So ... what about the sought-after user friendly and slick-user platform? I found that 95%+ of participants will not go to the platform after initial enrollment. Said another way, most participants chose funds and a deferral percentage and leave it alone.


For the small population of participants that actively manages their 401k, the basic functionality of changing investments and deferral rate was available and easy to use in all platforms I reviewed.


These “game-changing” features in a bundled solution were, in fact, not game changers at all.


Why Mountain West

The Mountain West 401k was specifically created to address the pain points and challenges employers experienced with bundled 401k solutions. Mountain West 401k is essentially a hybrid of bundled and unbundled 401k solutions, giving employers the best features from both solution types.


Interested in learning more? Go to the Mountain West 401k home page and complete the “get a quote” form today.


About the author


Mike Monroe is the founder of Mountain West 401(k).

Mike graduated from Gonzaga University with a finance and accounting degree and for the first 25 years of his professional career served in fiduciary roles as a Certified Public Accountant (“CPA’) and Chief Financial Officer (“CFO”) for many employers in the Pacific Northwest. Mike was the president of an employee benefits firm for 10 years where he launched the largest health insurance and 401k multiple employer programs for technology employers in North America, serving over 700 small business technology employers in 20 states.


Mike calls Tri-Cities home and volunteers as the President of the School Advisory Committee at Christ of King and U9 and U6 coach for the Three Rivers soccer club. Mike enjoys paddleboarding, soccer, skiing and hiking throughout the Inland Northwest.

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