As defined contribution (DC) plans like 401(k)s mature and record keeping becomes more competitive, employers sponsoring a retirement plan are enjoying greater benefits. But what are those specific benefits and what are the results.
In a study conducted by ADP entitled “The Automation of Retirement Plan Administration”, the specific benefits of comprehensive automation v. manual entry are detailed though surveys with over 400 plan sponsors. The results are revealing as those with basic services suffered:
- Less timely investing of contributions
- No automated ADP/ACP testing
- Fewer plans with documents in compliance
- Difficulty with loan administration
- Lower levels of satisfaction with their record keeper
The DC industry has turned their focus to improving participant outcomes for participants which is a noble cause but, without payroll integration, companies can get lost in the mire spending way too much time on manual, one way processing which increases risks of errors and fines. Though companies wondered at first why hire payroll companies to manage their DC plan, which was initially thought of as an investment service, with the success of ADP and other payroll vendors and the exiting of all but a few mutual fund providers from the DC record keeping market, that answer is clear now.
Before we can get to improving outcomes, we have to solve basic problems which is why almost all record keepers have created payroll integration functions. Basic employee information which changes constantly is available from payroll files – an automated synchronized process which reduce fiduciary risk and saves times will allow plan sponsors to eventually be able to focus on outcomes.
