Payroll Integration With Your 401(k): 5 Benefits for Your Organization
Are you a small business owner looking to save time and streamline your payroll and administrative processes related to your 401(k) retirement plan? Payroll integration may be the answer you’re looking for. With payroll integration, plan sponsors can seamlessly and efficiently access and share employee information including hire dates, hours worked, contribution rate, and much more.
Understanding the 401(k) Administration Process
There is no autopilot button for 401(k) plan administration—a lot more happens behind the scenes, including:
Tracking employee eligibility
Enrolling and communicating with employees
Auditing records to ensure contributions are accurate
Calculating and depositing contributions
Gathering payroll data each pay period
Gathering payroll data at the end of the year for compliance testing
A lot of work, right? Plan sponsors can alleviate much of the administrative burden of retirement plans by implementing payroll integration with their payroll/benefits system. With payroll integration, employees can adjust their contribution rates and personal information which will then be communicated to the plan sponsor through the system. Plan sponsors will adjust the data in the payroll system and prepare it for the next pay period. This eliminates the manual burden and communication with multiple systems.
Benefits of Payroll Integration with a 401(k) Plan
Reduce administrative errors
o Payroll integration can automate data collection and eliminate manual errors.
Sync Employee Census Data
o Employee eligibility and retirement plan entry dates are tracked through the employee
census data. This document includes:
- Personal Information (date of birth, address, SSN)
- Employee Information (compensation, hire date, eligibility date)
- Contribution Deferral Rates
o The census data report is used on an annual basis for nondiscrimination testing. Since
employee data can change frequently, the census audit is ongoing throughout the year. Payroll
integration can automate this process by syncing your census data and ensuring the plan
continually has updated information, to ensure compliance, and that employees are
receiving the correct information as it pertains to the plan.
Minimize Manual Administrative Work
o By integrating your organization’s retirement plan with payroll, the burden of administrative work is reduced. Most systems make it easier to track participant eligibility, enrollment, and deferral amounts. Any changes your employees make will automatically be communicated to both payroll and the retirement plan systems.
Automate Employee Contributions
o Since a 401(k) is a defined-contribution plan, your employees will contribute a set
amount of their paycheck to their retirement account. The employee contributions can be
automated with payroll integration, thus eliminating the manual tracking of deferral
changes and payroll adjustments.
Streamline Your Plan with a TPA
o A Third-Party Administrator can provide administrative services for your company’s 401(k) plan and can partner with you in handling the plan responsibilities. They can help limit fiduciary errors, and reduce the overall administrative burden of offering a 401(k) retirement plan. As your TPA, RPCSI can help streamline your 401(k) while ensuring it remains compliant and fulfills the duties that plan sponsors find overwhelming.
Considering Payroll Integration for Your Plan?
Managing your organization’s retirement plan is no easy task but understanding how your payroll and benefits systems communicate is critical for its success. From managing employee data to streamlining contribution processing, payroll integration for your 401(k) can save time, and money, and reduce administrative headaches for business owners and plan sponsors alike. Interested in learning more? Contact RPCSI today.