Benefits of Integrating Payroll with Your 401(k) Plan
As a 401(k) plan sponsor, one responsibility you face is to make sure that you and your employees stay educated and equipped with the right tools to put everyone on a secure path to retirement readiness. But how do you do this while running your 401(k) plan with maximum efficiency? Wouldn’t it be great if one simple solution—paired with your current payroll processing—could process and update records, handle participant contributions, and stay compliant with whatever new rules and regulations get tossed your way?
Well, integrating your retirement plan administration with your payroll process can do all of that. Plus, integration gives you more time to take care of what’s really important—running your business.
Three benefits of integrating 401(k) with payroll
Busy business owners are always looking for ways to save time, and streamlining benefit and payroll processes by integrating with 401(k) is a great way to start. Benefits of 401(k) payroll integration include
- Saving time and money by eliminating the need to daily monitor recordkeeping reports and payroll change/transaction emails, so you’ll have more time to focus on running your business
- Reducing the risk of errors or missing a request by automating the transmission of contributions and collection of required data
- Giving employees confidence that the changes they requested will be executed in a timely and accurate manner
How does 401(k) payroll integration work?
In a perfect universe, 401(k) administration is a seamless, 360-degree service between payroll and 401(k) plan processing. The necessary data that needs to go to the 401(k) providers from payroll (and vice versa) every pay period would be efficiently transferred, with very little effort from the business owner. However, this isn’t always the case. Many business owners utilize separate payroll services and 401(k) plans, meaning that communication with both is necessary whenever money flows between the two. But when you integrate the two services, you get the best of both worlds. The fully integrated services streamline the transfer of data and offer an attractive bundle: a payroll solution and retirement savings plan all in one.
But how does it work? The synchronized integration process provides the connecting points to a virtual two-way communication highway—linking and syncing employee information at every stage of the retirement savings process. Information is moved from the employee to the plan sponsor, then to the investment provider, and back again, while protecting the integrity of the data and significantly decreasing the risk of errors.
360° payroll integration
- Employer provides employee information to payroll provider for payroll and 401(k) handling.
- Payroll provider forwards payroll and employee data to Ascensus for processing.
- Ascensus processes employee and payroll data, then sends confirmation of payroll deposits to employer.
- Employee makes changes for deferral, Roth, loan, or hardship to Ascensus.
- Ascensus forwards employee changes to payroll provider.
- Payroll provider updates payroll system for employee changes.
Interested in adding payroll integration to your plan? View our payroll integrated partners or contact us today.
180° payroll integration
- Employer provides employee information to payroll provider for payroll and 401(k) handling.
- Payroll provider forwards payroll and employee data to Ascensus for processing.
- Ascensus processes employee and payroll data, then sends confirmation of payroll deposits to employer. If an employee makes a change for deferral, Roth, loan, or hardship, the employer will have to manually enter those changes into their payroll software.
Related: Benefits of Automatic Enrollment in a Retirement Plan
When the payroll system and 401(k) administration are integrated, employee information can be immediately uploaded in the onboarding stages, and plan participants can begin contributing as soon as eligibility requirements are met. When there are changes to the plan, such as updated employee contributions, the changes are immediately acknowledged and the records are updated. Plan sponsors and participants are kept up to date with information that will keep them on track to meet their retirement goals.
What’s the difference between 180° and 360° 401(k) payroll integration?
When a payroll provider is 360° integrated, the data exchange is full circle—from the payroll provider to the retirement plan recordkeeper and back to the payroll provider. After an employer uploads their company’s employee census data, they will have very minimal involvement, as the processing is handled for them. If an employee makes any changes to their account, the retirement plan recordkeeper sends the updated information directly to the payroll provider to update.
When a payroll provider is 180° integrated, the data flows only one way–from the payroll provider to the retirement plan recordkeeper. The employer is still able to automate the contribution process, but if an employee makes a change, the employer will have to manually enter that change into their payroll software.
Looking for a 401(k) plan that offers 360° and 180° payroll integration?
The benefits of integrating your 401(k) plan with payroll processing are clear, but finding the right 401(k) plan administrator with a history of successful payroll integration is key. Ascensus takes a customer-centric approach by offering retirement plan options with built-in integration solutions, giving you more time to run your business and less time to spend managing the plan.
If you’d like to learn more about how Ascensus can help your business integrate payroll processing with a retirement plan, don’t hesitate to contact our retirement specialists.
Learn more about the benefits of payroll integration.
