Time to Bundle Up?
Ed McCarthy
How plan sponsors can evaluate the possibility of including NQDC options as part of an integrated platform.
Defined contribution recordkeepers are working to integrate nonqualified deferred compensation plans into their service offerings. Phillip Currie, a senior vice president with OneDigital Retirement + Wealth in Sandy, Utah, says that several years ago, there essentially was no such thing as bundling, but today’s market is evolving, with examples going back to Voya Financial Inc.’s June 2018 acquisition of Pen-Cal Administrators Inc., which provided NQDC plans and consulting services.
Other defined contribution plan recordkeepers have adopted a white-label approach to partner with established NQDC providers. In July, Schwab Retirement Plan Services announced plans to work with Newport (formerly Newport Group), an Ascensus company, in deferred compensation. The partnership will enable sponsors and participants to access their NQDC plans through Schwab’s websites, including plan information supplied by Newport, according to Schwab’s press release.
Bundled and white-label arrangements force plan advisers who work with sponsors offering both DC and NQDC plans to make choices. Should a plan work with a recordkeeper’s bundled solution if one is available, or is it more beneficial to separate the plans? In Currie’s opinion, advisers should consider multiple factors, and he cautions that only a few 401(k) plan recordkeepers have best-in-class deferred compensation administration programs, although several are working to improve.
Brian Dennen, a principal in benefits adviser Curcio Webb who is based in Scottsdale, Arizona, says data integration is another factor to consider. He notes that recordkeepers partnered with NQDC vendors have achieved different degrees of integration. “Not universally, but for the most part, they’re using separate systems, and there are varying degrees of integration between those systems,” Dennen explains. “If you are evaluating integrating your qualified and nonqualified (plans), you have to dive into how much integration is there to determine if it’s valuable.”
Benefits to Bundling
Matthew Compton a retirement solutions partner in Brio Benefits in New York City, which was recently acquired by Alera Group, believes bundling’s main benefit is an improved experience for plan participants. He cites the example of a highly compensated employee participating in the employer’s 401(k) and NQDC plans.
In a perfect world, that participant could access qualified and nonqualified accounts on the same platform using a single sign-on, says Compton. That creates a more pleasurable experience for participants who have balances in both plans, because the balance of a deferred compensation plan can frequently far exceed the balance of a 401(k), he says.
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