Service in the Age of Automation

Author: Aaron McIsaac

Regional Sales Director

We want everything we do to be easier. Technological progression has simplified our personal and professional lives. We can buy our groceries and have them delivered with the click of a button. We can deposit a check without having to set foot in a bank. In addition, many of us now work remotely from our homes.

The retirement industry is no exception. Our goal is always to make life as easy as possible for our clients and partners. However, automating most of your retirement plan functions might not provide the best outcome.

Automating Retirement Plans

We’ve always faced risks as service providers, whether we’re administrators, advisors, or fiduciaries. There will always be political threats with attempts of governmental intervention and socialization of employee benefits every election year. Yet, the most significant risk that we face every single day is the digitization of retirement plans. Simply put, many retirement service companies aim to automate the plan sponsor’s experience as it relates to recordkeeping, administration, and participant advisory services. However, automation can also mean the jobs usually done by the provider are converted to “self-service”.

Straight Through Processing and the Risks Involved

“Straight through processing” is a term we all need to learn. In basic terms, this can also be described as “data in…data out”, or as many say, “garbage in…garbage out”. It refers to the process of using data provided by the plan sponsor or payroll provider to automatically execute retirement plan tasks, thus automating the experience for plan sponsors.

Most major recordkeepers have already implemented straight through processing with some functions. Routine tasks, such as auto enrollment, participant advice, and loan and distribution requests, are typically automated. Every major recordkeeper now offers a bundled arrangement where they can package their services to also complete testing and reporting. And all of this can be done with the click of a button from the plan sponsor.

Do these automated processes always work? Are recordkeepers assuming responsibility for the results? Do these processes allow for critical thinking? What about data integrity? Do recordkeepers check that? Generally, no. Instead, plan sponsors are responsible for ensuring the data used is correct. Every recordkeeper has language in their contract that directs responsibility back to the plan sponsor.

You Lose Some…You Win Some

We lost a pretty sizeable 401(k) opportunity a few years ago. We made the finals presentations, partnering with a well-known, national RIA firm. Unfortunately, we didn’t come out on top that day. Rather, the plan sponsor chose to go directly to a recordkeeper and not hire any of us, including the RIA.

Over the past few years, that plan sponsor has experienced several operational issues, which were highlighted during a recent audit. Consequently, the IRS found several errors. Many of the plan participants were incorrectly coded with a birth date of “1/1/2000” in the payroll software, and the recordkeeper accepted this data without question. This incorrect coding placed many of the impacted participants in the wrong target date fund, as they were auto enrolled upon meeting eligibility. Several participants also qualified for required minimum distributions at age 70 ½, and these were missed because they were coded incorrectly. This created a costly correction for the plan sponsor due to the participant count of the plan.

I’m happy to announce that the plan sponsor recently engaged us, along with the same RIA we partnered with previously, to correct the plan oversights and provide ongoing administration, fiduciary, and advisory services.

An Alternative Service Model

Plan sponsors have the ability to select a more comprehensive service model. This service model allows them to pair routinely automated functions from the recordkeeper with an independent administrator and fiduciary. Many sponsors and advisors hesitate to marry these services together. They often think it’s more expensive or complicated. However, if they take a little additional time up front to perform due diligence on firms like Goldleaf Partners, they’ll be surprised that we have a cohesive partnership with most major recordkeepers, and service reimbursements help keep the costs in line.

In the example above, the plan sponsor engaged us solely due to our fiduciary services model. In this model, we perform nearly 200 data integrity checks. We actually look for patterns in payroll data that just don’t add up. Our team calls them “ridiculousness checks”, and nearly 70% of the payroll files that we review have flags. These flags don’t necessarily mean there are errors, but rather point us to items that may need some investigation. Items such as duplicate social security numbers, participants with similar names, and changes in contribution patterns are common flags. The most common issue our team uncovers are incorrect January 1st birth dates, which can lead to costly issues for the plan sponsor if not corrected, as identified earlier.


I firmly believe that you cannot completely automate retirement plans. There are too many complexities and players that need to align. Payroll providers and recordkeepers have limitations. Every plan has the potential for unique design elements, and every plan sponsor has resource and expertise limitations that affect the administration of the plan. Therefore, the percentage of plans that can successfully be automated is quite small. 

I believe in the three-legged stool approach, incorporating the services of a financial advisor, recordkeeper, and third-party administrator (and in many cases, a 3(16) fiduciary). Including an independent administrator and fiduciary will make recordkeepers and advisors stronger as we leverage each other’s capabilities.