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How to choose the best 401(k) recordkeeping platform for your business?
The 401(k) retirement plan administration is an intricate process for recordkeepers. Recordkeeping is an indispensable task to mitigate the risks of legal non-compliance. To manage the changing demographics and regulations, and the high recordkeeping data volume, retirement plan administrators must use robust platforms.
A retirement plan administration software drives digital transformation to meet the market challenges. It manages key aspects such as participant data, reports, contributions, distributions, and compliance guidance. This makes selecting the right 401(k) platform crucial.
This article explains what 401(k) retirement plan recordkeeping is and the best practices to choose the right software platform.
What is 401(k) recordkeeping?
401(k) recordkeeping tracks the employees in the plan, the investments they own, and the monetary transactions. A 401(k) recordkeeper usually performs the following activities:
- Assess the eligibility
- Enrol new employees in the retirement plan
- Track and manage investments
- Manage 401(k) hardship withdrawals or loans
- Issue statement of accounts
Whether you outsource recordkeeping to a fund company, a payroll company, or an independent professional, or do it in-house, you need a software platform for a bird’s-eye view of the employee’s journey.
Additionally, the 401(k) system must integrate and exchange data seamlessly with other systems within the HR and finance departments.
Services comprising a 401(k) plan
The 401(k) recordkeeping platform can offer the following services and add more value to the employee:
- Recordkeeping: Tracks the employee contributions, eligibility, earnings, investments, loans, and withdrawals
- Third-Party Administration (TPA): Support for completing the 401(k) plan design, document, and annual Employee Retirement Income Security Act (ERISA) compliance
- Investment advice: Make appropriate investment recommendations to the participants in the 401(k) plan
- Custody of assets: Hold the participant’s assets in a trust and execute trades on demand
How does a 401(k) recordkeeping platform help?
A 401(k) recordkeeping platform augments the capabilities of the recordkeeper with the following features:
Reporting and analytics
The reporting and analytics feature helps track metrics about the performance. AI and ML algorithms generate relevant insights from the data and help the administrator customise reports in seconds.
Security and compliance assurance
The 401(k) platform encrypts data and uses authentication protocols to protect personal information from cyberattacks. Additionally, the 2FA authentication and multi-level encryption provide fraud protection in line with the Department of Labor (DoL) and ERISA guidelines.
Integration
A 401(k) recordkeeping platform seamlessly integrates with in-house and third-party applications to streamline enrollment, distribution processing, and loan management. The software uses APIs and web services to transfer accurate data accuracy with zero duplicity.
User-friendly UI
The platform simplifies a 401(k) administrator’s job by offering intuitive software to access critical information. The wizard-based UI, customisable layouts, organised menu, and drag-and-drop interface make it easy to navigate through and understand the data.
Best practices to choose a 401(k) recordkeeping platform
The right 401(k) recordkeeping platform for your company will depend on your unique needs, budget, and the volume of data. Here are some of the best practices to follow:
- Understand the unique requirements: Know your organisation’s unique requirements with respect to the 401(k) benefits recordkeeping. You may need to consider scalability, ease of use, cross-platform integration, data security, and cost-effectiveness.
- Research several service providers: Once you know your unique requirements, research and evaluate service providers in the market that have the necessary expertise. Check their customer feedback and market reputation before deciding to onboard them.
- Setup and implementation: Consider a system that is easy to install and set up and easily integrates with existing third-party systems. Your in-house team must understand the complete system functionality, from data import to running it live during operations.
- Check and evaluate the support options: Continuous support is critical once the 401(k) recordkeeping platform is set up. Along with a reliable administration solution, the service provider must offer quick and easy tech support.
- Evaluate the platform cost: Compare the platform cost against the features, support, and retirement plan administration solution it offers. Evaluate the cost with several suppliers and vet against the features, domain expertise, and ease of work.
How can Infosys BPM help with 401(k) retirement BPA?
The VPAS® BPA platform is a highly flexible 401(k) recordkeeping system that uses a rule-based structure to support sophisticated and complex plan designing. You can access it through a SaaS model or completely outsource the service.
Read about BPAS 401(k) customer service at Infosys BPM.