Top 3 Benefits of Integrating 401(k) Administration with Your Payroll Solution
May 31, 2022
If you administer a 401(k) plan to your employees, you know it’s centered around payroll deductions. However, there’s much more to it than that, including tracking employee eligibility, keeping records of both employee and employer contributions, calculating and depositing contributions, and reporting payroll data each pay period. On top of these important tasks, business owners must remain compliant with federal regulations to avoid expensive penalties. If this sounds like a lot of work, that’s because it is!
There’s a surefire way to automate this process, and it’s by integrating payroll with your 401(k) plan administration. DM Payroll Solutions shares the benefits of this integration so you can preserve valuable time for what’s important: running your business.
1. Simplified Payroll Journal
Most 401(k) plan providers require employers to share their payroll files to a recordkeeping system and confirm contributions are deducted accurately for each employee, each pay period. By integrating 401(k) plan administration into the payroll system, the process is streamlined entirely, saving you time and preventing an administrative burden.
2. Streamlined Employee Census Data
Employees’ 401(k) plan eligibility and plan entry dates are tracked through a business’s employee census, which is a 401(k) plan administrative document containing:
- Personal information (date of birth, address, name and Social Security Number)
- Employment information (pay information, eligibility date, employee status and hire date)
- Contribution information (employee deferral amounts)
An integration between your payroll and 401(k) plan administration can automate your census process by seamlessly reconciling employee data. Your plan will remain up-to-date, compliant with federal regulations and accurate in providing employees with the correct plan details.
3. Automated Employee Contribution Processing
Since 401(k) plans are defined-contribution plans, employees contribute wages toward their accounts. Processing contributions seems simple, but it’s important to recognize there’s data moving from multiple systems, which could cause miscommunication. For example, plan participants can submit deferral rate change requests whenever they please. Your benefits administrator must then track each request, manually input deferral data, adjust pay and then update the payroll system. With these many steps, there is bound to be human error, which could end up costing your company a fortune in compliance penalties. When payroll is integrated with 401(k) plan administration, deductions are automatically created and updated. If an employee signs up or updates their contributions, deductions are instantly updated in the payroll system, removing a handful of steps that would otherwise be completed manually.
We Can Help
Integrating payroll with your 401(k) plan administration is a breeze with DM Payroll Solutions’ 401(k) 360° Integration reporting. This feature allows our payroll system to directly integrate with many major third-party 401(k) administrators — providing for seamless data sharing between systems to eliminate frustrating and tedious data entry. For more information on how you can decrease your administrative burden by integrating your payroll with your 401(k) plan administration, contact us today.