Betterment for Business, a 401(k) robo adviser, said Thursday it entered into a partnership with HR services provider ADP to deliver a “seamless and efficient” integration with employers’ payroll and retirement plans.
Betterment for Business’ 401(k) service will be available in the ADP Marketplace, the cloud-based “app ecosystem” for human capital management. Under the agreement, ADP will provide API integration to Betterment for Business engineers who will develop a solution that automates participants’ allocation of funds from paychecks to their 401(k) plans.
“When you defer payroll money to the 401(k), your plan sponsor has to go in and take the information, provide it to your payroll provider that is it going into [the plan], and the payroll company has to calculate what actually goes into your bank account and what goes into the 401(k),” says Cynthia Loh, general manager of Betterment for Business.
“Without payroll automation, this was a fairly manual process. For plan sponsors and HR teams in general, the number of overall vendors that companies work with to make the HR function starts to stack up.”
With retirement plans, this can mean employing a record keeper, CPA or plan adviser, along with the payroll company. “It is not a very seamless integration,” Loh says.
The cloud-based solution should be completed by Q2 of this year, and Betterment for Business hopes that clients will sign up for the service by the end of the year. Loh adds that partnering with a tech-savvy vendor with a large client base like ADP’s — it provides payroll functions for one in six U.S. businesses — means that cloud security will be a top priority.
“This is a payroll company and a financial services company. We both need to have the highest standards of security,” she says.
ERISA compliance is another concern of both Betterment for Business and ADP. “One of the aspects of ERISA compliance is ensuring that you get your payroll deductions and 401(k) information in a timely fashion. [This is] an integration that alleviates operational burden on plan sponsors and it lets technology take over,” she says.
“It is a 360 integration, which means both the payroll company will provide us with information about 401(K) deferrals, and when a participant changes the percentage or the dollar amount they are contributing to a 401(k), those get fed back to ADP,” Loh says.