401(k) plans don't have to take up all of your time

Bundled plan services generally require more work from the employer rather than less, particularly for smaller employers that might do payroll in-house, for example. The employer might have to manually enter year-end plan census data into the provider’s website, for example, instead of just downloading it into a spreadsheet. These little extra tasks add up to a substantial time commitment.

When the data entry website asks for eligible compensation does the employer’s payroll person understand the definition of eligible compensation as it relates to the plan? As a reader of this page do you know why a plan would benefit from using prior year’s data as opposed to current year data for certain testing purposes? In most cases the answer to these questions is no. You need to be able to answer yes when you use a bundled provider. How would you obtain this knowledge? How much time would it take to learn these things? How do you even know what you need to know? These are all considerations when choosing your service providers.

Since bundled providers are very automated they can be very efficient at things like generating the various notices your plan might be required to provide participants at various times of the year. Examples are for 404(c), safe-harbor, automatic enrollment and fee disclosures, among others. Automation is good at things that might otherwise rely on the memory of a person. That can be a benefit to an employer in-terms of compliance. To the extent that those notices can be distributed by the service provider this can reduce the employer’s plan related workload.

So are bundled services more work? While some providers offer more service to clients than others, an employer hiring a bundled provider will likely find those services adequate if they assume this is a “do it yourself” situation. If the expectation is that the provider will take over and do everything the employer will likely wind up being disappointed and might just be looking for a new provider before long.

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