Benefits Admin Outsourcing Providers Can be Boon to Employees’ Future and Companies’ Ongoing Pocketbooks
Employees with company-offered retirement savings plans are today facing a triple whammy – defined benefits offerings (such as traditional pension plans) are on the wane, especially for new hires; stock market volatility is severely impacting the value of 401(k) portfolios; and lack of understanding and investment planning advice is driving inactivity or poor contribution decisions.
And employers offering defined contribution plans are facing challenges of their own. Financial risk, market volatility and regulatory changes make it extremely difficult for companies to design retirement programs to align with their business goals and optimize results.
But benefits administration outsourcing providers – such as Fidelity, Hewitt and Mercer – which offer advisory services to their clients and make professional investment information more easily accessible to their clients’ employees can help all parties’ pocketbooks. Services beyond administration of benefits programs offered by some of the providers in today’s marketplace include: insight into how automatic enrollment can lower plan administration costs and save businesses time in the enrollment process; input into how the contribution limits for business owners and key employees can rise with more employees participating in the 401(k) plan; data on volume discounts; plan design; actuarial services; global risk services; investment consulting; legal consulting; administration and communication services; and employee-focused online information portals.
While all of the above are advantageous, auto enrollment in 401(k) plans, allowed by the Pension Provision Act of 2006, is a biggie in driving participation – which is good for employers and employees alike – per recent Hewitt and Paychex studies. Based on a survey 160 U.S. employers, Hewitt found 59 percent of respondents already offer automatic enrollment to new employees, and an additional 12 percent are likely to implement it in 2010. Its survey also found that 74 percent of employees contributed to their 401(k) last year. And research published just last week by Paychex found that a whopping 92 percent of employees in small companies participated in their companies’ 401(k) plans when auto enrolled, as compared to 72 percent without auto enrollment.
On a broader scope, NelsonHall research found per its last benefits administration report that top benefits administration outsourcing drivers included, “Process improvements to improve participant experiences, e.g., faster and more flexible enrollment, more pension modeling tools and improved communication services. All drive an increase in the quality of service to benefit participants”.
To put the importance of defined contribution plans and making contributions to them based on professional investment information into laser clear focus, all we need do is look at the growing reality of the social security shortfall. The annual statement I received last week contained an * next to my benefit which said, “Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at anytime. The law governing benefit amount may change because as of 2037, the payroll taxes collected will be enough to pay only about 76% of scheduled benefits.” Sobering? You betcha. So employers: help your employees out with retirement contribution plans…doing so will also help you in innumerable ways. And employees: don’t wait. Obtain the information you need to make the right investment decisions and begin participating today!
Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall
Tags: 401(k), benefits administration, benefits administration outsourcing, Fidelity, Hewitt, hr outsourcing, hro, hro research, Mercer, nelsonhall, Paychex, Pension Provider Act of 2006, retirement plansYou can comment below, or link to this permanent URL from your own site.