A lot goes into the management of retirement accounts at a Plan Provider such as yourself. If you look at retirement plan management as an army, Plan Administrators are a whole separate regiment, responsible for ‘running’ the retirement plan to the specifics required. While your administrators may not make investment decisions, they have specialized skills and knowledge in the regulations of funds and are responsible for coordinating and managing the accounts.
Most Plan Providers today choose to outsource plan administration, and with good reason. A good six reasons, actually, and here they are.
1. Ramp-up on demand
A full-time plan administration department within your organization comes with many extra costs. Office space, recruitment and onboarding costs, employee benefits, etc. Outsourcing takes all of that away. Instead, you pay your outsourced partner per project or contract. So, if there is no work, you don’t incur expenses. An outsourcing partner can help you ramp up or down based on your business requirements.
Administrative tasks are routine and repetitive but require time and attention to detail. Directing your internal resources elsewhere, such as planning for the next quarter, firing up your sales team, researching new retirement plan options, etc., are far more productive uses of their time and attention. Outsourcing plan administration gives your core team support to take up or focus on projects that may strengthen or grow your business.
Payroll management, distributions processing, loans management, and employee account transfers… the list of administration tasks is pretty long. Outsourcing such work to a specialist third-party service provider dedicated to reorganizing data storage and management can improve efficiencies by leaps and bounds.
Retirement plans are subject to complex administrative rules and regulations, which change from time to time. These may be difficult and time-consuming to track but are imperative to keeping retirement plans compliant so as not to attract fines from the Internal Revenue Services or the Department of Labor. The solution to this would be to outsource day-to-day plan administration to a third-party specialist that offers comprehensive data management, census data management (important to avoid missing or inaccurate employee census data), complete contribution calculation, compliance testing, and thorough accounting services.
Think of what would happen if a long-time employee within your organization, who oversees plan administration, decides to quit. Hiring, onboarding, and training another employee to fill that gap will take a while and can result in service downtime. What if the new employee is unable to manage the retirement plan appropriately? All these worries are avoided if one works with a third-party plan administrator with expertise in documentation, data management, compliance regulation, and a pool of trained resources for redundancy.
One of the challenges unique to the retirement plan industry is managing seasonal workload. While transaction processing happens periodically, Form 5500 Filing and Compliance Testing are annual processes that require a significant investment of time and resources. Bringing full-time employees on board throughout the year just to handle these annual spikes generally does not make business sense and is a significant challenge for administrators. On the other hand, outsourcing allows you to tap into a resource pool and scale up or down your monthly engagement based on varying workloads.
Congruent’s outsourcing services efficiently manage plan administration from data management and recordkeeping to complete contribution calculation and compliance testing. If you want to start a conversation about outsourcing plan administration, fill in the form below, and we will reach out to you.