Record Keeping Should not become house keeping.
Integration of payroll and record keeping systems is a key element to helping companies save time and efficiently manage their defined contribution (DC) plan. At a TPSU program in Boston at the UMass Club, a 230 person Boston based not for profit plan sponsor explains the problems along with a unique approach to hardship withdrawals.
Because her two systems do not speak to each other, the plan sponsor has to input address changes and other new information into both systems. Depending on the number of loans each pay period and other changes, she estimates that she spends two days each pay period integrating both systems.
As discussed in an interview on 401kTV with ADP’s head of retirement Joe DeSilva the benefits of automation include:
- Alleviating risk
- Faster allocation of deposits
- Seamless transfer of files
Most major record keepers work closely with payroll vendors to integrate administration without plan sponsors having to get involved but with the growing use of auto-plan features like auto-enrollment and auto-escalation, that integration will only become more important putting payroll providers in a strong position.
- Less frequent DOL audits
- More timely contribution
- Compliance testing done quicker
The survey also showed that plans that do not automate have lower levels of satisfaction with their record keeper.
The biggest benefit of TPSU programs is peer to peer interaction not only to get new ideas or the comfort to know that others are having the same issues but also to get help. Another plan sponsor at the program used the same record keeper and promised to assist the not for profit sponsor to straighten out the issues. Sometimes, record keepers have the solution but plan sponsors do not realize it with a vast array of products and services.
Finally, the not for profit explained a simple way to slow down hardship withdrawals: she requires proof that, for example, the plan participant is actually facing eviction. While record keepers do help with verification, sometimes engagement can help participants to think twice.