Certified Plan Sponsor Professional (CPSP) Practice Exam

What is a primary objective of utilizing a bundled service provider arrangement?

1. Cost savings through efficiency

2. Flexibility in service offerings

3. Increased investment options

4. Improved risk management

The correct answer is: Cost savings through efficiency

The primary objective of utilizing a bundled service provider arrangement centers on achieving cost savings through efficiency. When plan sponsors opt for a bundled arrangement, they consolidate multiple services under one provider, such as recordkeeping, administration, and investment management. This integration can lead to several operational efficiencies that reduce overhead costs and streamline processes. By having a single point of contact and a cohesive system, administrative tasks can be automated or simplified, leading to faster service and lower operational expenses. The reduced complexity often lowers the fees associated with separate service providers, allowing sponsors to achieve greater overall cost-effectiveness. Furthermore, a bundled provider may leverage economies of scale that arise from managing various aspects of plan services, passing these savings onto plan sponsors. While flexibility, investment options, and risk management are important considerations for plan sponsors, they do not serve as the central aim of opting for a bundled service structure. The unique benefit of a bundled service provider is the enhanced efficiency that directly contributes to cost savings.