Technology is adding efficiencies in every part of the business world, and retirement plans are no exception.
From an emphasis on cybersecurity, to the ability to use robotics process automation, data analytics and bots to eliminate time spent on collecting, scrubbing and aggregating data, employers need to consider how these new tools can be used in their organization.
“The technology is available, so it’s often a matter of helping people recognize how it could apply,” says Kim Flett, managing director of compensation and benefit services at BDO USA, LLP. “We spend a lot of time educating plan sponsors on what technology is out there now, and we’re only going to see more innovation over the next 10, 15 years.”
Smart Business spoke with Flett about how cybersecurity, automation, data analytics and bots are converging with retirement plans.
Why is cybersecurity so critical for retirement plans?
Retirement plans and the $28 trillion that they currently hold in the U.S. are major targets for cyber hackers. Cybercriminals target entities that manage vast amounts of assets and personal data — two characteristics inherent in retirement plans, which include confidential information like participant Social Security numbers and birthdates.
By law, fiduciaries to 401(k)s and other retirement plans have a duty to act in the best interests of the participant, and protecting sensitive information is part of that job.
What can employers do to improve their data protection?
Retirement plan sponsors and the vendors that service them, like the Fidelities of the world, are increasingly moving to multifactor authentication. This is where people log in with a passcode and then get a text alert where they have to verify the code.
Employers also shouldn’t be afraid to question the cybersecurity of any investment adviser, service provider or third party that touches their retirement plan. The data need to be secure whether it’s stored directly with the employer, at a third-party service provider or while it’s transmitting between the two.
While there’s no way to completely eliminate the threat, employers should:
- Identify what information could be at risk.
- Monitor what service providers are doing to address risks at their organizations.
- Review existing frameworks and current industry developments through resources provided by the American Institute of Certified Public Accountants, the Department of Labor and others.
- Understand their organization’s broader cybersecurity plan and identify ways it should be tailored to address the unique risks that retirement plans and participants face.
How are automation, bots and data analytics starting to be used with regard to retirement plans?
With retirement plans, there can be a lot of mundane tasks like consolidating data from forms in order to store the 401(k) or payroll records. Bots, which are software robots, can take on these types of tasks.
Employers also may be used to calling vendors and asking a person on staff for a beneficiary or distribution form. Increasingly, the employer or participant may be contacting a virtual assistant, like an Alexa of the 401(k) plan, to get the information they need.
In addition, retirement plans can get complicated when a company has multiple divisions, employers working in different states or more than one payroll company. Data, for example, have to be compiled and sorted and then sent off to the third-party administrator or vendor where the 401(k) plan is invested so that it can do the year-end testing. Thanks to data analytics, programs can be designed to help extract all of that data, so employees don’t have to do data entry or other manual-intensive tasks.
Bots and data tools can become big time savers, so it’s important to investigate how automation might add efficiency to your retirement plan processes.
Insights Accounting is brought to you by BDO USA, LLP