Mercer’s sale of its U.S. defined contribution administration book of business to Transamerica is designed to provide “enhanced” retirement options for clients, the consulting firm says. The deal, expected to close by the end of this year, will see Transamerica become Mercer’s preferred DC recordkeeping provider and will likely boost Transamerica’s position in the retirement space, experts say.

Mercer’s U.S. DC retirement administration business has more than $71 billion in plan assets, 148 clients and more than 917,000 participants. The acquisition will bring Transamerica’s totals to approximately 5 million participants and $216 billion in assets.

Transamerica’s tools and capabilities will provide participants with “an enhanced option,” says Sandy McCarthy, Mercer’s U.S. benefits administration leader. “We’re really excited to be able to tap into ongoing investments Transamerica is making in this space." 

It’s probable the company is exiting the DC recordkeeping business “because margins are so much thinner,” says Robert Lawton, president, Lawton Retirement Plan Consultants. “Mercer used to be a player in this business,” he says, adding that the move is "part of continuing consolidation in this business.”

Also see: “Tips for safeguarding benefit plans against deficient audits.”

This represents a big “step up” for Transamerica, says Lawton, adding it “shows they want to be a serious player in the recordkeeping business. There is a significant commitment to technology that needs to be made to stay competitive [and] Transamerica is willing to make that commitment."

The partnership “strengthens Transamerica’s leading position in the U.S. retirement sector,” says Transamerica President and CEO Mark Mullin, in a statement. “This latest strategic development supports our aim to further grow and diversify our customer base, while continuing to expand our offering of fee-based retirement solutions.”

The deal will not affect Mercer’s defined benefit and health plan clients, the company says. “We also want to clearly state that we are committed to continuing to provide best of class service to our defined benefit and health clients through our own solutions,” says Ken Haderer, Mercer’s chief operating officer, in a statement.

Mercer employees won’t be affected either — Transamerica intends to offer employment to all of Mercer’s DC-related employees in their current locations, McCarthy says. “That was important to us,” she says.

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