Best Practice #10: Utilize Technology
Welcome to the Alliant Best Practices Series for 401(k) Plan Sponsors, in which we offer 10 best-practice essentials for helping plan participants achieve retirement plan success. Here’s the tenth and final best practice in our series.
In our last post we talked about safe harbors options. In this post we’ll talk about how we are utilizing cutting-edge technology to the advantage of plan sponsors and participants. When used right, technology brings companies greater organization and efficiency. Here are a few key examples.
Bi-Directional Data Feed
Implementing a bi-directional feed between the payroll provider and the record-keeper will help keep records accurate and up-to-date, as well as eliminate unnecessary administrative work. Once this system is implemented, any participant deferral changes will automatically update on the payroll side, and vice versa: any payroll changes via the plan sponsor will update the record-keeping as well.
Participant Communication Automation
One of the key responsibilities plan sponsors have under ERISA is delivering sufficient and timely notification to plan participants. As Millennials – a notably tech-savvy generation – are making up an increasing percentage of retirement plan participants, it is prudent for plan sponsors to consider how their approaches to technology differ from previous generations. Are your plan’s notices entirely paper-based, and have you explored the breadth and depth of your electronic communication options? Many up-and-coming plan participants, for example, now call “checking the mail” opening up a mail app in their smartphones.
Auto Termination for <$5k Balances
Retirement plans tend to accumulate clutter over time as employees come and go. When such employees are terminated it makes sense to have a default process in place to address their remaining balances. Auto termination is one such option.
With Auto Termination your vendor, not you, will automatically contact terminated employees with balances less than $5,000 to make arrangements for transferring them out of the plan. If a participant will not provide direction for how they will accept the distribution an IRA is opened up in their name and their 401(k) balance transferred into their new IRA account.
Eligibility Tracking and Automatic Notification
Is your plan set up to automatically track eligible employees and provide the necessary disclosures at least 30 days in advance? How much manual work does tracking employee eligibility and sending disclosures for each employee require, and how many errors have there been? This is another area where the right technology can greatly help ease the burden of administration.
To plan participants, taking a loan out of their retirement plan can at first seem like a tricky endeavor, and it will involve a bit of administrative red tape. At your company is such a process manual or automated? Would participants be able to see their options and implement them at the push of a button? These kinds of options may be seen as details, but it is the details that truly make the difference.
There are, of course, more ways to utilize technology to create greater organization and efficiency with corporate retirement plans, but these are a few key points to keep on your radar.
Thank you for reading Alliant’s Best-Practice Series. Our next series is in the works – stay tuned!
Do you like what you’ve read so far in our Best Practice Series for 401(k) Plan Sponsors? We also offer a complimentary presentation to further explore these best practices with you and other key retirement-plan decision-makers at your company. Please contact us to learn more.
This blog is written to help make the lives of plan sponsors easier in the process of meeting legal requirements under ERISA for their defined contribution plans. Please understand that reading this blog should not alone take the place of a one-on-one consultation regarding the needs of your specific plan, and hence cannot be a guarantee against fiduciary breaches.