401k Security Technology adds a layer of protection that can be useful to Retirement Plan Committees. Retirement plan sponsors are hoping to achieve error-free data for plan sponsors and plan participants. Without it, plan sponsors expose themselves to excess liability, not to mention the lost time it takes to correct bad data. Of course, mistakes happen, but there are ways to reduce them like partnering with a 401k security technology provider that uses data management technology.
According to a recent article from Employee Benefit News, there are several reasons to employ 401k security technology. For one, using 401k Security Technology makes it easier to manage the plan. It also cuts down on advisors chasing data errors, and for third party administrators, it assists with plan administration and ensures participant data is accurate for compliance testing purposes. In addition, having accurate data means a plan sponsor can have confidence that the plan meets the needs of participants. It also instills confidence in employees that their plan is well managed.
Without 401k security technology, errors can go undetected for long periods of time, resulting in costly and time-consuming corrections and potentially, audits and fines. Conversely, data management technology immediately flags and amends errors. It is worth noting that some providers are more diligent about regular data management updates than others. It behooves plan sponsors to vet them carefully. To reiterate, selecting a provider with data management technology helps plan fiduciaries fulfill their responsibilities by reducing plan errors. It also saves them time and money.
According to Employee Benefit News, these are some questions plan sponsors and retirement plan committees could ask when searching for a provider:
- Do you include data technology services with every plan you offer?
- What steps do you take to make sure data is accurate and readily available?
- How many data points do you check?
- How often do you review payroll data for discrepancies?
- Do you also review data for employees who aren’t signed up for a plan?
- How well does your process work with payroll services?
- Can you share statistics that show how well your technology works?
One aspect of provider selection that the EBN article does not mention is cybersecurity. It’s now more important than ever for plan fiduciaries to make sure providers have proper protocols in place to prevent cybersecurity breaches. According to the Government Accountability Office (GAO), cybersecurity poses a “major risk” to 401(k) plans. There is a lack of consistent guidance as to how plan fiduciaries can address those risks.
ERISA is largely silent on the fiduciary obligations associated with cybersecurity, and the Department of Labor (DOL) has only provided limited guidance. However, with sensitive data being shared across plan sponsors, recordkeepers, custodians, third party administrators, and payroll providers, it is difficult to keep data secure. In addition, among several plan sponsors, recordkeepers, and custodians the GAO interviewed, nearly all said that cybersecurity is a fiduciary duty.
In 2019, when Congress commissioned the GAO report, there were approximately half a million reports of suspected cybercrime. The related losses were more than $3.5 billion, according to the report. 401(k)s are a red-hot target for cyber thieves. With 106 million participants nationwide, and assets of about $3.6 trillion in the system – the target is broad.
The fiduciary risks and margins for error are greater than ever in our increasingly technology-driven world. Thus, plan sponsors and fiduciaries should take 401k security technology and cybersecurity seriously. Fiduciaries should consider partnering with providers that offer best-in-class solutions.
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.