Which Of The Three 401k And 403b Service Models Is Right For Your Plan?

To most outsiders, the defined contribution (DC) market appears confusing and complicated. But there are just three service models for 401k and 403b plans to choose from. Let’s review the different models and which might be best for your plan.


There are three types of services provided by so-called service providers which include plan administration, record keeping and investments. In the bundled model, the record keeper provides all three services. Along with administration, which includes consulting or plan design as well as discrimination testing and 5500 form preparation, the bundled provider also acts as the record keeper.

Just as it implies, record keepers keep track of participant and plan records maintaining the website. Record keeping systems are the main way for plan sponsors and participant to interact with their accounts. Though many record keepers offer proprietary funds, most offer funds from other companies called DCIOs (defined contribution investment only). Regardless, the record keeper controls which funds are available on their “platform”.


The record keeper performs the same roles as in the bundled model except that they work with an independent third party administrator (TPA) who performs all administrative functions using the record keeper’s platform.

Open TPA

In this model, the TPA performs administrative and record keeping functions while leveraging a third party trustee and custodian who also offers thousands of funds. Top custodians include Schwab, Fidelity, TD Ameritrade and Matrix not to be confused with the TPA.

Strengths and weaknesses of each model:

In the bundled model, there’s only one throat to choke so if something is going wrong you know who to blame. 401kTV maintains a proprietary list of national record keepers indicating which markets  they serve and which service models are offered. These national record keepers spend close to $100 million annually to maintain and upgrade their systems. The issue with bundled service models is lack of customization for smaller plans which is why they are the least popular model for plans under $10 million. On the other hand, this model is most popular for larger 401k and 403b plans because the record keeper can afford to offer more customization and dedicated consulting.

While unbundled models offer more customization, they can be more costly with two providers to pay and can be more complicated with two systems to integrate. Unbundled service models are the most popular for smaller plans and least popular for 401k and 403b plans over $10 million.

The Open TPA is second most popular model in all markets consisting mostly of over 500 regional TPAs. They offer lowest cost and greatest investment flexibility but the technology is more limited than massive national record keepers.

So what’s right for your plan? If you want streamlined, integrated service from a large national financial service company with state of the art technology, go bundled. For smaller plans that want customization and flexibility as well as a local service provider, unbundled is best. And, finally, if you want low cost and investment flexibility then Open TPA would be a good choice. It’s critical to review your current service model as companies mature and plans get bigger to determine if a change is in order.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

Check Also

401k Record Keeper, Advisor, TPA explained

Nipa News: Roles of 401k Record Keeper, Advisor, TPA Explained

NIPA News Video: Roles of 401k Record Keeper, Advisor and TPA explained. Attorney Ilene Ferenczy, managing partner of Ferenczy Benefits Law Center, sits down with 401kTV to explain the different roles and responsibilities of 401k and 403b record keepers, advisors ...