Insurance companies (and annuities) play a far greater role in delivering 403(b) plans than in the 401(k) market---and the sale of annuities through these plans is far more lucrative than recordkeeping a plan dominated by mutual funds. In order to successfully sell these annuities, insurers rely on on-site representatives. However, these representatives may not act in participants’ best interests. Changes in how we work as the result of the COVID-19 pandemic --with an increased reliance on on-line resources--may provide plan sponsors the opportunity to revisit the current delivery model.

Revenue for “bundled” recordkeepers have been facing downward pressure for years--both on recordkeeping fees and asset management fees. Over the past decade recordkeeping fees have dropped 50 percent and investment fees paid by 401(k) plans have dropped by 38 percent over a similar period. These bundled recordkeepers are looking to fund managers, plans, and individual participants to compensate for this decline. The recordkeepers’ search for new revenue sources can create challenges for plan fiduciaries and sponsors and should be monitored closely.