The employee's question first raises the lure of bundled service providers. Bundling entails the classic "one-stop-shopping" sales pitch. This isn't just a snake oil scheme, many employers – and their employees – would prefer the convenience of one-stop-shopping. Heck, if it works for WalMart and Target, it probably works for 401(k) plans, too. Face it, when it comes to administering their 401(k) plans, most plan sponsors would rather not. Worse, when it comes to thinking about investing their 401(k) plans, most employees would rather not.

As a result, any service provider promising to make things easier has a natural leg up. This might explain why plans retain bundled service providers well beyond the time when it's cheaper to use an unbundled platform.

Which brings up fees. Most experts agree bundled service providers charge higher fees than unbundled service arrangements – at least for plans above a certain size. But are fees the only reason to consider an unbundled environment?

The employee who asked the original question inadvertently raised the second, more important issue, when he apologized for any perceived impudence by using "Madoff" as a justification for his questioning. Paradoxically, the employee was afraid of falling into a Madoff situation when it is the bundled organization itself that is more likely to produce a Madoff scenario. In an unbundled situation – i.e., one which involves several independent service providers – the 401(k) plan sponsor places each vendor in a position to check the other vendors. Bundled providers simply cannot provide this measure of safety.

So, when assessing bundled vs. unbundled packages, 401(k) plan sponsors should look at more than just the fees. Plan sponsors need to also consider the overall safekeeping of the assets of the plan.

After all, this is the best way to prevent a 401(k) plan from falling prey to the next Madoff.