In some ways, this is a radical suggestion. Where outsourcing of DC plans is almost a given, many companies have administered their DB plans in-house, although that has been changing in recent years. A 2005 survey by Hewitt Associates shows that 68% of DB plans are outsourced. As DB plans become more complex to administer, notes Scott Peterson, head of the retirement outsourcing practice at Hewitt, the desire to keep them in-house falls commensurately. "When the law changes, there are changes in [DB plans'] administrative processes," Peterson says. "When one company acquires another and they both have plans, they have to merge [them] too. It becomes increasingly difficult over time for a company to keep up with the changes and procedures and maintain the knowledge and staff required to operate these programs."

Outsourcing providers "have the resources, the technology, the wherewithal to understand every legislative change-how to implement it and how to make sure we're compliant," NCR's Kriner says. "In an environment where you're not doing outsourcing, I don't know how an employer would keep up with all those things, let alone implement them."

The cost of the necessary technology is another argument for outsourcing plan administration. As baby boomers approach retirement, there's an emphasis on providing Web-based, self-service systems that let workers monitor their accounts, look at the impact of investment choices they're considering and model how much income they'll have in retirement. But the software that it takes to provide such assistance could put a strain on an ordinary company's IT budget. "No technology is cheap," says Guy Patton, president of Fidelity Human Resources Services. "These technologies are especially not cheap." The money that Boston-based Fidelity spends to upgrade and maintain its platform is spread across a base of more than three million participants, Patton says, not the thousands, tens of thousands or even hundreds of thousands in any individual company's plans.

So once a company has been sold on outsourcing, vendors argue it is a small step to appreciate the additional efficiencies and cost savings with TRO. "There are some economies of scale," says Robyn Credico, national director of defined contribution consulting for Watson Wyatt. "The provider can leverage administration across both plans–only one set of payroll feeds, one set of edits." Other functions that can be consolidated include the Web platform, the call center and communications with participants and the plan sponsor.

Fidelity's Patton notes that every time a company outsources a function, it has to assign employees to oversee that relationship. Using a single provider for multiple plans requires fewer employees and resources, he says.

While the companies that provide TRO say that it cuts costs, they're wary of putting a number on those savings, noting that every company's circumstances are different: Some are adopting TRO after having administered their DB plan in-house, while others already outsourced both DB and DC, but with different providers. The level of service provided to plan participants before adopting TRO also varies. But Fidelity reported in 2003 that a return on investment analysis showed plan sponsors using TRO saved between 15% to 20% of the cost of administering pensions internally.

A lot of buzz about TRO revolves around the advantages that the arrangement provides employees. Kriner notes when a single company is administering both DC and DB plans, employees can access a single Web site to get information and use a single 800 number to ask questions. "As you think about self-service and information, it's really a great way for employees to have this whole life cycle managed by one provider," he says.

A COMPLICATED HANDOFF

Ed Moslander, director of pension products at TIAA-CREF, which does not provide TRO, says that it can be especially helpful for employees because when one outsourcer administers both plans, their statements show all their retirement benefits. "You're going to get consistency in the provision of information," Moslander says. Particularly as employees get closer to retirement, having a single source of information and advice is a big benefit, he adds.

Of course, it's no small task to transfer a DB plan to a provider, especially when the plan has been handled in-house. Providers estimate that it takes up to a year with a DB plan, versus three to six months with a DC plan. At NCR, Kriner says that it took 12 to 18 months and adds that the company spent another six months grooming its DB data and doing internal due diligence before it selected a provider. "There's a clean-up process that you have to go through so that when you go to market, you've got good data," he says.

The interest in TRO is occurring at the same time that retirement plans are facing scrutiny over how plan costs are allocated, the extent to which participants are informed about plan costs and whether plans cut costs by accepting less than optimal investment choices. Consultants suggest that hiring one company to administer both DB and DC plans could pose even more conflicts of interest. "My concern is that the opportunity for obfuscation is greater," says Ward Harris, managing director of The McHenry Group LLC, a benefits consulting company. However, Harris notes that "disclosure, documentation and a stated purpose of doing the right thing goes a long way toward addressing these issues."

Sandy McCarthy, president of retirement services at Citistreet, a joint venture of Citigroup and State Street, notes that she's seeing companies inquire about TRO in RFPs even when they're not ready to adopt it. "They may not want to make the decision today," McCarthy says, "but they want to know they're going to a provider who can provide that service if they choose to go in that direction."