Payroll integration

What payroll integration is

People in the industry describe two levels. A one-way integration, often called 180-degree, sends each payroll’s contribution data to the recordkeeper, while someone at the employer still updates deferral rates in payroll by hand. A two-way integration, often called 360-degree, also writes deferral and loan repayment changes back to payroll. With no integration, the employer uploads a contribution file after every pay run.

Why it matters to employers

The Department of Labor requires employee deferrals to reach the plan as soon as they can reasonably be separated from company assets. Each manual step is a chance for a late deposit or a missed deferral change, and both have to be corrected at the employer’s expense. When you compare providers, ask what data syncs, how often, in which direction, and what remains manual.

Example

An employee raises her deferral from 4% to 6% in the 401(k) app. With a two-way integration, payroll picks up the change before the next run. With a one-way integration, someone has to enter it. If it is missed for two pay periods, the employer may owe a corrective contribution.

Common mistakes

• Assuming “integrated” means two-way.

• Not reconciling payroll totals against plan deposits after each pay run.

• Adding a pay code or a new company in payroll without mapping it to the plan.