It’s a major milestone when a business can offer its employees a 401(k) plan for the first time. You’re taking better care of your employees, keeping your best employees and attracting top talent. It also means you’ve arrived as a company—your business is growing and you’re more stable than ever.
Unfortunately, your new 401(k) plan may also be driving your payroll practitioner to early retirement.
Many companies are surprised by the amount of time and effort they have to invest into managing data between the investment and payroll systems. Not only does the extra work cause headaches, it creates legal risks as well.
401(k) administration comes with strict legal and fiduciary requirements. Companies may not always have knowledgeable staff or bandwidth to effectively manage retirement plans.
Manual data entry means someone has to dedicate several hours each pay period to track employee eligibility and individual contributions, and confirm employees’ deferral rates. The possibility of error is ever-present.
Incompatible Systems Demand Heavy Investments
Typically, weekly 401(k) plan administration looks something like this:
Any time an employee makes a deferral change
- Employee changes their deferral.
- The 401(k) broker emails you a notification.
- You manually make the deferral change in the payroll system.
- The payroll company logs the new deferral rate.
Every time payroll is run
- Manually check for newly eligible employees.
- Send notices to those people.
- Add new enrollees to the system.
- Receive an export file from the 401(k) broker of each employee’s loans, deferrals, and stock information.
- Manually enter the employee data into payroll.
- Run payroll.
- Payroll cuts checks.
- Upload the payroll report to the 401(k) broker.
- Broker gets withholdings/match from your bank account (ACH).
For many organizations, this adds up to hundreds of hours of manually creating checks and entering deductions. It creates tremendous opportunity for human error, which also puts companies at risk for litigation.
Some of our clients have spent as much as $60,000 on “pseudo-automating” a link between their investment company and their payroll company by setting up a series of off-cycle pay periods.
Investing in Automation Pays Off
IDI’s Time Bank Investment Link makes 401(k) payroll integration easy. The Investment Link is designed for organizations that use an investment firm for employee retirement, stock options or other investments. Time Bank reads and processes export files from the investment company system, applies logic and mappings, and creates import files in the format required for payroll. The software can even manage the logic that stops automatic deductions for loan repayments once the loans are paid off.
With Time Bank’s 401(k) payroll integration, all you need to do is run payroll. Time Bank does the rest. Integrating investment data and payroll systems becomes a simple, automatic process that reduces cost, risk and labor.
Partnering with IDI may be the smartest investment you make!
- Learn how we work with you to implement Time Bank.
- Read about the hidden costs of building your own integration system.
- Contact us about partnering with IDI.