How Technology Helps Small Business 401(k) Plan Management 

Author: Siân Killingsworth / 25 Jun 2023 / 401(k) Plan Information, Small Business 401k

Technology is making significant advancements across various aspects of business operations, and small businesses can reap the benefits as well. Small business owners have many responsibilities that eat up lots of time, but using technology to manage their 401(k) plan can help.

Over the past decade or so, the move to online management has reduced and in some cases eliminated the traditional challenges of 401(k) plan management. This makes plan management easier and more efficient for small business owners. Let’s explore how this has been achieved.

The Traditional Approach to 401(k) Plan Management

Managing a 401(k) plan traditionally involved a lot of paperwork and meticulous calculations. Employers had to manually track employee contributions, ensure eligibility for the plan, and monitor investments. This process was time-consuming and prone to human errors, and reliance on physical documents and manual calculations made 401(k) plan management burdensome.

Processing paperwork by hand took up valuable time. Enrollment forms, contribution records, and compliance documents were all processed by hand. This created a risk of misplacing or misfiling important documents, and could lead to discrepancies and compliance issues.

The Impact of Technology on 401(k) Plan Management

Technology advancements have revolutionized 401(k) plan management for small businesses. With specialized software and online services that provide comprehensive solutions, automating various tasks has become straightforward.

Enrollment and contribution processes can be automated allowing small business owners to focus on what you do best — run your business.

• Automation of Enrollment Process: Technology enables automation of the enrollment process. Previously, this was a manual effort which included paperwork and individual communication.

Modern software and online services offer user-friendly interfaces, allowing employees to enroll electronically and eliminating the need for physical forms. This automation ensures a smooth onboarding experience for new employees and facilitates efficient plan participation.

• Streamlining Contribution Management: Technology has transformed the way contributions are handled in 401(k) plans. Automated contribution management eliminates the manual tracking and calculation of employee contributions.

Specialized software and online platforms enable automated contribution systems, deducting contributions from salaries and depositing them into retirement accounts. This automation saves time and reduces the risk of errors, ensuring accurate and consistent contribution management.

• Simplified Account Monitoring: Technology such as Ubiquity’s proprietary Paradigm recordkeeping system simplifies account monitoring, which used to require manual effort.

Advanced software and online services give real-time access to account data. It also provides customizable reports and intuitive dashboards. This makes it easy to monitor investments and make informed decisions.

Types of Technology Used

Common technology tools used for efficient 401(k) plan management include:

• Online platforms for employee enrollment, contribution management, and accessing plan information.
• Investment monitoring software to track plan performance and make necessary adjustments.

Benefits of Using Technology for 401(k) Plan Management

Utilizing technology for 401(k) plan management offers several benefits for small businesses:

• Saves Time: Automation of tasks allows you to focus on other business aspects.
• Reduces Risk of Error: Technology minimizes the chances of human errors in calculations and paperwork.
• Cost-Effective: Choosing low-fee, flat-rate providers helps employees save for the future without excessive costs.
• Boosts Employee Engagement: Technology also promotes employee engagement and education in managing their retirement savings. Many 401(k) management platforms offer interactive interfaces and educational resources, empowering employees to actively participate in their retirement planning. Access to investment information, retirement calculators, and educational materials fosters financial literacy and ownership among employees.
• Improved Access and Security: Cloud-based storage and enhanced data security measures have significantly improved the accessibility and protection of sensitive plan information. Online services offer secure storage and backup options, eliminating the risk of misplacing or losing important documents. This ensures data integrity and provides peace of mind knowing that critical plan information is readily available and protected.

Challenges of Using Technology for 401(k) Plan Management

While technology has numerous benefits, it’s important to address the following challenges:

• Cost: Hidden fees should be carefully considered, and reliable providers should be chosen. Look for plan providers that charge a low, flat fee (like Ubiquity!).
• Employee education: It’s important to communicate clearly and to offer training to employees. This improves their understanding of how to effectively use online platforms provided by the plan.

The Future of Technology in 401(k) Plan Management

As technology continues to advance, managing 401(k) plans will become even easier for small business owners. Future tools and platforms may offer further streamlining and cost-effectiveness. There may also be a focus on providing personalized retirement savings advice to employees using technology.

Advancements in technology have revolutionized 401(k) plan management for small business owners. Through automation, improved access, and enhanced employee engagement, technology has simplified the administrative burden and increased efficiency.

Small businesses can use software and online services to simplify and manage their 401(k) plans more efficiently. This will help them stay compliant and improve the financial health of their employees.

Digitization of the process has made 401(k) plan management more accurate and cost-effective. It has also increased employee participation, which is critical to their financial success in retirement.