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E Pluribus Unum?

Recordkeeper Consolidation in Multi-Vendor 403(b) Plans

Sam Kirby, CFA
Senior Manager | Consulting Research Group

In his 1970 book, Future Shock, Alvin Toffler introduced the concept of overchoice, a cognitive process in which people struggle to make decisions when faced with many options. Decision making is particularly draining when options are “equally good,” because discerning the differences between them requires more mental energy.[1] Many retirement plan participants face choice overload as they consider the dozens of investment options within their plans. This complexity compounds when they must also select a recordkeeper within a multiple-vendor environment.

The Latin phrase E Pluribus Unum, found on every U.S. coin minted since 1873, translates as “Out of many, one.”[2] This installment of CAPTRUST’s series on change management within higher education retirement plans focuses on whether plan sponsors should retain multiple recordkeepers, reduce the number of vendors, or consolidate to a single vendor. This pivotal decision is among the first that plan sponsors and retirement plan committees face when evaluating changes to their plans. Because the resulting outcome affects all plan stakeholders and the trajectory of future changes, this decision is laden with importance. 

Evaluating and selecting service providers is an ongoing fiduciary responsibility, and plan sponsors must make decisions using a process focused on the best interests of participants. This article sets out a framework to help plan sponsors evaluate multiple-recordkeeper plans through this lens. As always, there is no single right answer for all institutions. Factors related to the plan’s current state, as well as the institution's long-term objectives, will influence this decision. As with all such assessments, plan sponsors should seek the advice of legal counsel regarding topics including ERISA status, plan combinations, and plan design, to name a few.

Although the structure described below stems from the fiduciary responsibilities appropriate for plans subject to the Employee Retirement Income Security Act of 1974 (ERISA), the basic tenets of sound process and decision making are relevant to all parties making choices impacting plan participants—even those who are not subject to ERISA.

Multiple Recordkeepers in 403(b) Plans

Colleges and universities with multiple recordkeepers typically arrived at this state in one of two ways. Some plan sponsors, seeking to maintain exclusion from ERISA coverage for voluntary, employee- deferral-only plans under the DOL’s 403(b) safe harbor, limit their involvement to serving as a conduit between participants and vendors. One provision of the safe harbor is that plans offer a reasonable choice of investment products and vendors. The natural result is a prevalence of multi-vendor plans. 

Since the task of demonstrating limited involvement may be further complicated by the requirements of the final 403(b) regulations released in 2007, some plan sponsors choose to forego ERISA exclusion and use a consistent process across all plans. The commitment to making decisions in plan participants’ best interests, paying reasonable expenses, and carrying out their duties prudently—although serious responsibilities – can be attractive for institutions seeking to provide high-quality, competitive benefit programs. This decision is not without cost, as it may impose requirements such as written plan documents, Form 5500 filing, independent audit, and fiduciary oversight. Some governmental and religious organizations (exempt from ERISA by entity type) reach a similar conclusion, choosing to manage their plans with a process that uses ERISA as a guideline.

Before the prevalence of open-architecture investment platforms, some plan sponsors added recordkeepers to provide participants more investment choice and manager diversification. The modernization of recordkeeping systems has addressed this concern – widespread adoption of open-architecture investment platforms means that plan sponsors can build menus of investment options that are not limited to their recordkeepers’ proprietary offerings.

A Framework for Evaluation

As with most plan-related decisions, the recordkeeper consolidation question requires an examination from multiple perspectives:

  • Fiduciary. Does our current multi-vendor environment serve the best interest of plan participants?
  • Administrative. Would vendor consolidation provide an opportunity to streamline administration and achieve higher levels of service?
  • Participant-outcome. Do multiple recordkeepers improve or complicate the participant experience? Is plan communication enhanced or impaired? 

With these perspectives in mind, fiduciaries can examine the following aspects of the consolidation decision:

  • Plan-related fees. Consolidating to a single vendor may yield significant reductions in recordkeeping expenses. These savings benefit participants in the form of lower-cost investments, excess revenue rebates, or the provision of enhanced services.
  • Negotiating power. When plan sponsors consolidate assets with a single vendor (which can often take many years to accomplish, given mapping restrictions), they maintain greater leverage in fee negotiations and may receive more competitive bids if the current provider no longer meets the needs of the plan.
  • Streamlined administration. Vendor consolidation can create administrative efficiencies (and the potential for fewer errors) as a result of simplifying functions, including payroll remittances, plan reporting, audit and form 5500 filings, and compliance administration.
  • Participant disruption. The disruption accompanying vendor consolidation can be considerable. Strong attachments can form between participants and providers. In addition, mapping assets from one vendor to another may require direct participant action. However, the disruption caused by vendor consolidation may represent an opportunity to re-engage with participants, with a goal of causing participants to re-examine saving and investment decisions made years ago.
  • Participant communication. A single provider can streamline the enrollment process for new participants and create a more cohesive brand around the retirement plan. Fiduciaries should also consider the service models of current providers. Some providers may be more effective than others at reaching distinct participant cohorts. Others may have strengths (or weaknesses) in different media (on-campus, Internet, telephone).
  • Complexity of frozen assets. One sticking point in the consolidation discussion is the treatment of legacy assets with deselected vendors. Often, these assets are outside of plan fiduciaries’ control. They cannot be mapped to the remaining (or new) providers. Plan sponsors must therefore balance their duty to monitor plan assets with an inability to effect change on these assets and the reality that plan sponsors are limited to providing educational information about these funds.

This evaluation is likely to uncover multiple issues that fiduciaries will want to prioritize and address over time, perhaps leading to a decision to consolidate vendors. But even if the result is to stay the course with a multi-vendor model, it can identify areas for improvement. Investment menu alignment, with similar asset-class structures and largely identical, open-architecture investment menus, can reduce choice overload. Coordination of communications plans may help participants no longer think of their “Vendor X Retirement account,” but rather the “ACME University Retirement Plan.” Finally, committees can work with vendors to develop a shared participant engagement strategy, identifying and benchmarking areas for improvement over time.

Readers will recognize the Latin phrase in this article’s title, E Pluribus Unum, not only from U.S. coinage, but also from the face of the nation’s official seal. For institutions considering vendor consolidation, this may become a goal, either in the near or longer term. Yet, there are two lesser-known phrases on the reverse of the U.S. seal, which may also convey meaning on this topic:

  • Novus ordo seclorum or “The new order of the ages,” and
  • Annuit cœptis or “Approved of our undertakings.”

College and university retirement plans have entered a new age, and the undertakings of fiduciaries have never been under more scrutiny. This does not mean that the natural course for all institutions is to consolidate vendors, but rather that considering consolidation is an appropriate exercise. The conditions that supported the introduction of multiple recordkeepers may no longer exist, while the costs of offering more than one vendor have grown.


[1] Toffler, Alvin. Future Shock. Bantam Books.

[2] The Great Seal of the United States, US Department of State, Bureau of Public Affairs, obtained from



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