The Payroll Interface can be the Achilles Heel of your 401(k) Plan
Why is sending my payroll submission to the record keeper such a hassle?
Also, why doesn’t my record keeper talk to my payroll company?
For many small business owners sponsoring a 401(k) Plan, the interface between their payroll provider and the record keeper can be one of the most confusing and frustrating aspects of running their retirement plan.
There are dozens and dozens of record keepers and hundreds of thousands of payroll providers. Unfortunately they don’t all operate using the same standards or procedures. Also, the two largest payroll providers, ADP and Paychex, are in the 401(k) record keeping business so they aren’t always inclined to play well with other providers.
The small business that can’t afford a full time HR or payroll person may find themselves stuck with a very frustrating problem if the payroll company and record keeper are not talking to one another.
I just want to run my payroll and be done with the 401(k) for the week…why can’t that happen?
It can happen! However, you must consider the following:
- Does my payroll company partner with my record keeper?
- If they do not partner, is there a different record keeper we can move to that does?
- Should I consider a new payroll provider?
- Are there third party firms that can provide an interface?
You don’t always have to upset the entire apple cart when looking to simplify your payroll processing, however sometimes that is the best solution. Perhaps you need a new payroll provider, perhaps you need a new record keeper, perhaps you need both, or maybe you just need someone that speaks the right “language” to advocate on your behalf.
Should I just hire my payroll company to handle my 401(k)?
The answer is not so clear cut. There are many instances of a payroll provider not being a good fit for a small business on the 401(k) side. See the below article for some information from attorney Ary Rosenbaum:
The Biggest Mistake You Can Make Is Hiring Your Payroll Provider As Your 401(k) TPA
The other factor to consider are the sheer number of payroll companies out there (over 300,000!)
Number of Payroll and Book Keeping Companies in the U.S.
The best answer is to discuss your situation with an expert that can give you unbiased information on how these systems work and if there are ways to simplify your day to day experience. Give us a call and we’d be happy to talk you through some potential solutions.
Call us at (619) 942-4510 to learn more or set up a consultation.
