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Catching Up with Recordkeeper Technology

I spend a lot of my on-the-job time researching the recordkeeping platforms of retirement plan sponsors.  In the course of my research, as of late, I have come across an interesting phenomenon. For lack of a better term, I will call it technology lag.

Recordkeeper technology, for the most part, has become state of the art.  However, in almost every case I have researched lately, plan sponsors are not taking full advantage of this technology.  Let’s take the enrollment process as an example.  Most vendors can now completely outsource enrollment and salary deferral changes, so that all changes can be easily completed electronically via the recordkeeper’s website, with zero involvement on the part of a plan sponsor.

However, for the vast majority of the plan sponsors I’ve studied, when a participant clicks on the portion of the website that requires salary deferral information, they are directed back to their employer, where they are then requested to complete a paper form.  Yes, good old-fashioned paper!  Personally, in both work and in life in general, I hate the rare occasion where I am required to complete a paper form.  Thus, I suspect that a significant number of participants never bother to follow through with the paperwork when their online enrollment process is disrupted in this fashion.

The reason for this technology lag on the part of the plan sponsor is simple:  deferral elections require an exchange of data between the recordkeeeper and the plan sponsor, and that data interface has simply not been built.  Thus, this part of the recordkeeper’s web portal has been turned off.  In addition to the participant disruption cited above, the use of a paper form means more work for the plan sponsor and, of course, the greater potential for error.

What can be done to address these and other examples of technology lag (which often involve data interfaces)?  Well, if the problem were an easy one to solve, I suspect it would have been solved by now! For our client base, some plan sponsors, particularly in the large non-profit and public sector, are using HRIS/payroll technology that is seriously outdated and was built in an era that did not contemplate such recordkeeper interfaces.  Unfortunately, for these plan sponsors, the data interface with a retirement plan recordkeeper will often have to wait until new operating systems are purchased.  The problem is less pervasive, though still present, in large corporate plans (since they tend to have more current operating systems) and smaller plans of all entity types (since the external payroll providers that dominate this market tend to have well-established interfaces with the major retirement plan vendors).

For plan sponsors whose technology is current, the use of the necessary data interface is possible, but smaller issues have gotten in the way of execution.  Some of these include recordkeeper file specs that are too complicated, HR/HRIS/Payroll/IT not on the same page with each other and/or the recordkeeper, and parties that are too busy to dedicate the time needed to complete the interface.

Having worked with several plan sponsors to implement the required data interfaces to make everything run smoothly, I can say that it has been well worth the effort; not only in terms of the reduction in administration and operational errors, but also for the increased participant engagement.  Increasingly, participants expect their retirement plan experience to be similar to their internet shopping experience, and, if there is no technology lag, their expectations can be met.

Do you have any retirement plan questions?  Feel free to message me on Twitter or email me at  

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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