Human Capital & Careers

Why Did the Pension Sponsor Cross the Road?

To get to another services provider. Just 18 of the Fortune 100 buy outsourcing and actuarial services together, survey finds.
CFO.com StaffMarch 21, 2003

Relatively few large pension plan sponsors bundle outsourcing with actuarial services, according to a recent analysis of the Fortune 100 by Watson Wyatt Worldwide. Among the 100 companies, 84 sponsor a defined benefit plan, but only 18 plan sponsors obtain outsourcing services from the same firm that provides actuarial services, according to the survey.

“As a practical matter, every single large company that sponsors a defined benefit plan outsources to one degree or another,” said Eric Lofgren, global director of the benefits consulting group at Watson Wyatt, in a statement. “And while full outsourcing to a single service provider might make sense for some companies at the smaller end of the spectrum, the fact that only 18 of the largest plan sponsors outsource all of the work to their actuarial provider tells us a few things.”

One thing the lack of bundling reveals is that companies like to diversify. A whole lot of employers “don’t want to put all of their eggs in one basket, especially with relationships of this size and significance,” Lofgren thinks. From a corporate governance standpoint, many companies also worry about how appropriate it might be to buy both services from a single source–just as many companies now shun using their auditors for other consulting services.

Then there’s the bargaining angle. Many corporations “are concerned with giving the outsourcing provider too much leverage at renewal time,” said Lofgren.

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