Many plan sponsors have moved from a defined benefit (DB) to a defined contribution (DC) model for delivering retirement benefits to their employees. As DC plans have evolved, more sophisticated investment solutions have been developed. While new fund structures have provided the benefits of lower costs and more robust diversification, the infrastructure—fund menu construction, participant communications, and coordination of service providers—has been a challenge for plan sponsors as it requires an expertise and functionality that sponsors do not necessarily have or want to build.

DC outsourcing has emerged as a solution to these trends. It allows sponsors to exploit scale and buying power to provide their employees with sophisticated retirement solutions without having to build the necessary expertise and functionality in-house.

This overview, based on our series of DC outsourcing articles, covers everything from the fundamentals (why, what, and how to outsource), contracting, and issues of residual fiduciary liability.

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