How to leverage technology to simplify retirement administration
With approximately 65,000 clients and $55 billion in assets under administration, ADP is one of the largest and fastest-growing defined contribution plan recordkeepers. Employee Benefit News recently spoke to Joe DeSilva, senior vice president and general manager of ADP Retirement Services, to discuss industry trends and ADP’s approach to the market. Highlights of that conversation follow.
Employee Benefit News: What are the top priorities of the plan sponsor that you’re working with today, and have they changed in recent years?
Joe DeSilva: First, it’s about attracting and retaining talented employees, and helping them to retire at a desired age with sufficient income. Two would be getting the right balance in the plan investments. And the third would certainly be around plan fees. I’d say they have been the same priorities for at least the last five years.
EBN: How do you help address sponsors’ focus on fees?
DeSilva: As a recordkeeper, we’ve always been fund-agnostic; we don’t care where you put your money. But the focus on fees and Department of Labor fee disclosure regulations have made more low-fee and zero-revenue-sharing funds available.
EBN: When and why did a payroll systems company like ADP get into the retirement plan recordkeeping business?
DeSilva: We got into the business back in 1989. As a firm that excels in supporting the intricate data management, recordkeeping, payroll tax and compliance for businesses, it was an obvious extension for us. The retirement plan solutions are a core competency of ours and fit well into our overall value proposition.
EBN: Do you have any relationships with the plan sponsors who you don’t also serve with respect to their payroll processing needs?
DeSilva: Yes, our retirement plan product stands alone very well, so we have relationships with plan sponsors that don’t have ADP payroll.
EBN: Is there any correlation between the size of the plan sponsor and their using ADP both for payroll and retirement plan recordkeeping?
DeSilva: In general, the payroll integration value prop resonates very well with companies with smaller internal staffs to manage this kind of work.
EBN: Are the services available priced as a bundled package?
DeSilva: We don’t bundle our payroll recordkeeping products. Our recordkeeping fees are the same for ADP and non-ADP payroll clients.
EBN: ADP is as much a technology company as anything else. What technology innovations have you introduced lately?
DeSilva: About a year ago we introduced our mobile app that is designed to help drive participation rates, participant education and help people take actions, like increasing their deferral amounts or swapping funds, without having to send in a bunch of paperwork.
EBN: How do you leverage mobile to get participants to take action?
DeSilva: We can communicate with them with messages like, “Hey, it’s your birthday, would you like to increase your contributions by 1%? It will mean X dollars more in your retirement income per month.” So it’s a very customized interaction with the participant. They can take action right on their mobile phone like, clicking here to increase their contributions by one percent in response to that message.
EBN: Can participants pretty much do anything on the mobile app that they could online on a desktop?
DeSilva: No, we still can’t do investment allocations just yet. It’s the basic stuff: enroll, increase your contributions.
EBN: Can the push notifications be customized for each sponsor?
DeSilva: It’s not customized at the plan level yet, but might be in the future. There are three kinds of messages. Besides the one I mentioned, it also tells employees when they are eligible to enroll, and when they hit the age that makes them eligible to make catch-up contributions. But we won’t set this up unless the plan sponsor wants it.
EBN: If the sponsor is already using your payroll system, I guess that creates lots of ways you could customize messages. What do you think you might do down the road?
DeSilva: We haven't framed up what the next ones are, but some of the discussions we have are about linking messages to pay increases, like, “Hey, you just got a pay increase, did you want to increase your 401(k) contribution as well? It will be X dollars less out of your paycheck, but it will mean X dollars more at retirement.”
EBN: How else are you leveraging technology to simplify plan administration?
DeSilva: We just recently launched a technology called “fund changes online” that gives the sponsor or their financial advisor the opportunity to do all their fund changes electronically. Our goal is ultimately remove non-value add, let people self-service and make the service really easy and effortless. You don’t have to request paperwork to do it. Another example would be our two-click 5500 filing. You don’t have to call in; it’s just two clicks to file your 5500.
EBN: You administer nonqualified plans. How big a part of your business is that?
DeSilva: We purchased our non-qual business from Mercer in 1997. We originally focused on clients in the Fortune 1000 space, but in response to clients’ requests, we enhanced the recordkeeping platform so that other clients could display both their non-qual plan and their long-term incentive plan on the same website. So our sales organization continues to sell it actively. I wouldn't say it’s the fastest growing component of our business set or our solutions set, but something we continue to offer.
EBN: Earlier you mentioned that you are “fund-agnostic.” Does that mean plan sponsors can choose any asset manager they want?
DeSilva: We have relationships with the vast majority of investment managers. But ultimately it’s up to the plan sponsor to choose the investments that best fit their needs. We also have multiple investment platforms as part of our solution. We have open-fund architecture, we also have what we call our investment statement platform, where we screen funds based on specific qualitative and quantitative criteria. So they have a choice there. They need to exercise discretion over any action on the investments through the lifetime of the plan.
EBN: So you’re making it clear that you aren’t assuming any fiduciary responsibility in that area?
DeSilva: There’s always that fine line of fiduciary-non-fiduciary. If sponsors choose an investment policy statement that we have developed that reflects their goals, we can help them by narrowing down the vast investment universe into sample lineups that fit the investment policy statement. We screen the universe of investments against that policy statement. But the plan sponsor makes decision of which sleeve [set of funds] best fits them at point of sale, and then into the lifetime of the plan, and we will do this screening of the investments. We will let the plan sponsor know when an investment has not passed our screening criteria. But it is up to the plan sponsor to go in and take action and swap that fund out for another investment.
EBN: Do you offer any retail IRA platforms for employees when they retire — can they do a rollover to an ADP IRA?
DeSilva: No. A participant can either keep their assets in their employer plan, or roll over to an IRA somewhere else. We don’t provide them any advice; they have to do their own research. That’s kind of the crux of the DOL regulations, protecting people to help them avoid ending up in high-fee products.