401(k) Payroll Integration

Without system and software integrations, it’s likely that your work would be more manual, time consuming, and prone to errors. 401(k) payroll integration is no different. Let’s explore the importance of 401(k) payroll data integration and understand how it really works behind the curtain of your sustainable 401(k) plan.

What is Payroll Integration?

401(k) payroll integration is the process of syncing employee 401(k) data with the payroll system. This eliminates the need for manual data entry, and keeps the data consistent, compliant, and up-to-date. 

Employees log in to and make changes to their retirement contributions within the platform owned by the 401(k) recordkeeper, whose job is to keep track of the money in the plan. Traditionally, if an employee changed how much they wanted deferred from their paycheck into the 401(k) someone would have to manually enter that change into your payroll software, the ones processing the paycheck. 

When the payroll software is integrated with the recordkeeper’s system, any changes made by the employees are automatically updated in the payroll system, and thus reflected in the employees’ paychecks and 401(k) plans. 

Not only is this more efficient, but it also helps prevent any potential errors from manually entering the data and retirement plan contributions for each employee every pay period.

Why is 401(k) Payroll Integration Important?

Integration of your 401(k) payroll system is important because it saves time and money, creates less administrative work, and decreases the risk of errors and compliance issues. 

To expand upon these benefits:

• Saves time — Without payroll integration, the business owner, payroll manager, or whichever employee oversees the 401(k) plan, needs to invest their time in manually inputting the contribution data from the recordkeeper’s system to the payroll system. Over the months and years, an integration can also save the company money because you are not paying an employee to manually review and do data entry every pay period. 
• Less administrative work and headaches — Manual data entry… need we say more? 
• Decreases the risk of errors and compliance problems — In addition to headaches and time, manual data entry tends to have a greater risk of errors. And because a manual process is less streamlined, you run the risk of not getting employee 401(k) contributions completed in time. There are compliance deadlines for getting the employee deferrals into their retirement accounts. Late deposits have consequences, such as compliance penalties, excise tax, and employees missing out on the potential interest these deposits could have earned if invested in a timely manner.  

Your 401(k) should be an incredible benefit for your employees as well as easy to manage, and a payroll integration makes this possible.

The Difference Between 180° vs. 360° Integration

360-degree payroll integration is an efficient, automated solution for integrating your payroll data with your 401k provider. With this type of integration, all of the data that you upload to your payroll provider is automatically processed by both software platforms, which helps ensure streamlined and accurate information flows between them.

180-degree payroll integration, on the other hand, involves manual data entry because the data only flows one way — from the payroll software to the 401(k) recordkeeper. This means that when an employee logs in to the recordkeeper’s platform and makes changes to their retirement account or contributions, the employer must make sure that that information is updated in the payroll system. 

There aren't many companies that have true 360° integrations because it can take a lot of effort and investment to get a full software API connection. But many record keepers can say that they integrate with almost every payroll software because they have a way to remove the manual work of integrating the different systems for the company — whether that’s a true 360 degree software connection or an assistant on their end who logs in and runs payroll each pay period on behalf of your company.

Manual 401(k) Payroll Data Integration

There are some 401(k) recordkeepers that do not integrate with certain payroll providers. In this case, if the company did not want to change recordkeepers, there would be some manual 401(k) processing required every pay period. This takes about five minutes every pay period to do. Typically, the employer will download a report from the payroll provider and then manually upload that report to the recordkeeper. 

Basically, if the process must be manual because of the recordkeeper or payroll provider you know and love, then there are ways to make it work.

How Carbon Collective 401(k)s Integrate with Payroll 

As your investment advisor, Carbon Collective will help you identify the best solution for a 401(k) recordkeeper that best integrates with your payroll. In most cases this will be automated, and for those that can’t automate with a 3rd party recordkeeper, it will require a simple manual process. Even when there is no true 360° integration, most recordkeepers will use a “genie behind the curtain” approach where they can have someone process the manual payroll for your company. 

This gives your company the flexibility to stay with the payroll provider (and recordkeeper if you have an existing 401(k) plan) you’re already using if you choose to.

Carbon Collective’s record keeper partners integrate with almost every cloud-based payroll provider. There are some smaller payroll providers that do not have software integrations, and therefore, can’t integrate with any 401(k) plan. Book a free Strategy Session  with Carbon Collective for help determining the best steps to make the process easy and identify alternative options.

Integrates With All Cloud-Based Payroll Providers

401(k) Payroll Integration Summary 

What is payroll integration?

 401(k) payroll integration is the process of syncing employee 401(k) data with the payroll system. This eliminates the need for manual data entry, and keeps the data consistent, compliant, and up-to-date.

Why is 401(k) payroll integration important?

Integration of your 401(k) payroll system is important because it saves time and money, creates less administrative work, and decreases the risk of errors and compliance issues. 

What is 180° payroll integration?

With a 180-degree payroll integration, the data only flows one way — from the payroll software to the 401(k) recordkeeper. This means that when an employee logs in to the recordkeeper’s platform and makes changes to their retirement account or contributions, the employer must manually update that information in the payroll system. 

What is 360° payroll integration?

360-degree payroll integration is an efficient, automated solution for integrating your payroll data with your 401k provider. All of the data that you upload to your payroll provider is automatically processed by both software platforms, which helps ensure streamlined and accurate information flows between them.

What is the best 401(k) payroll integration?

A 360 degree payroll integration is ideal, and whether or not this is possible depends on the payroll software and 401(k) recordkeeper you use. You can use the 401(k) comparison tool to learn what 401(k) plan is the best fit for your company, and explore ESG 401(k) portfolio options.