Plan Automation
While the defined contribution industry is focused on investments, the new DOL fiduciary, TDFs and improving investor outcomes, plan sponsors still struggle with plan automation, compliance and DOL audits. So before we can get to the things we want to do, we have to take care of what we have to do. Avoiding a DOL audit is at the top of the list and a recent study by ADP shows that plans that automate processes are less likely to be audited.
As explained by Joe DeSilva, head of ADP’s retirement division which commissioned a survey to determine the effects of automation, the benefits of automation include:
- 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.
One of the biggest issues that cause a DOL audit is late payroll contribution payments so it makes sense that automation would result in less frequent audits. But perhaps even more important, plans that have a streamlined, automated process save time and avoid errors. It’s also quite difficult to institute the Ideal Plan if there are manual payroll processes or, even worse, different systems.
DeSilva comments that while automation makes common sense, because DC plans are governed by the complicated rules under ERISA, automation is even that much more important reducing not just fines but fiduciary responsibility.
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.
