Uber has taken the world by storm forever changing the way people hire drivers. Not only are costs lower but it’s a lot simpler to order a car using leading edge technology – drivers can work on their own whenever they have free time without a set schedule. There’s a lot of speculation and venture capital betting that technology will likewise change the way that benefits, particularly 401(k) plans, will be administered. A seasoned ERISA law firm dives deeper into the question.
Fees are only an issue in the absence of value –Uber riders may not care that they are riding in an older Honda rather than a new Lincoln Town Car or that the driver also doubles as a fitness trainer or real estate agent. The risk of a bad ride is low as are the repercussions – most times we just want to get from point A to point B.
But that analogy may not work with record keeping and administration of defined contribution (DC) plans like 401(k) and 403(b) plans. First, the stakes are higher not just in terms of costs and liability but also for people not being able to retire when they or the company want. Low touch options may be preferred by some people in some situations but most HR and finance people have 10 responsibilities and do not have a lot of experience managing a DC plan. Understanding the right service model that works best for the plan, participant and employer (in that order), can usually be best accomplished through an RFP most likely with the help of an experienced advisor.
Technology promised to help make our lives easier and simpler. Yet cell phones and email have done the opposite creating greater expectations and, yes, increased productivity. Similarly, with more focus on the importance of DC plans and more regulatory scrutiny as well as the threat of litigation, there’s more work to do managing a plan even if they are infinitely more efficient to admininster. Robo record keepers will likely leverage technology better than traditional ones and will certainly be less expensive but, unfortunately, managing a DC plan is more complicated than getting from point A to point B, and the repercussions of not getting there are much greater.
