It’s hard to argue with the effects of the Ideal Plan which starts with auto enrollment but sometimes practical issues like payroll integration can get in the way. A small not for profit organization in NYC discusses the challenges after a TPSU program held at NYU conducted by Adjunct Lecturer Jamie Greenleaf.
The Ideal plan includes auto-enrollment at 5-6%, auto-escalation up to 12%, a stretch match and use of professionally managed investments like TDFs. Over a work career, participant balances can triple while arguably lowering administrative work and fiduciary liability without increasing costs much or at all. So why don’t more companies use it?
Sometimes it can be as simple as payroll integration. The NYC based not for profit plan sponsor was very excited about the Ideal Plan and would like to implement it within her organization but she’s not sure she can as she has three payroll vendors and three sources of income which are not totally integrated. Though there is some form of automation, the integration can be a barrier to helping improve outcomes.
Over the last decade, 401k record keepers have made great strides improving technology and service some of which has come through massive consolidation weeding out poor performers while boosting assets and resources of the surviving providers. Integration with payroll is key among these improvements which is why some payroll providers like ADP and Paychex have actually started 401k record keeping divisions. But the 403b market is a bit behind though catching up quickly with fewer options and perhaps less competitive pressures.
Focusing on improving outcomes is something most 401k and 403b plan sponsors, advisors and providers support but basic hurdles like compliance and payroll integration must be overcome first before companies can move forward. Professionals managing 401k and 403b plans need to engage senior management in order to improve plans and the plan sponsor at the NYC not for profit noted that she got lots of new practical ideas to take back at the TPSU program held at NYU like the benefits of the Ideal Plan.
