A New Way 2 401k

7 Step 401k Census Checklist

Something is seriously wrong with me. I’m worried.

Recently, I seem to be obsessed with 401k census. This will be my second blog post in a row focusing on the almighty census. So, buckle up cause this is some exciting sh*t. No, no really…an accurate census is absolutely crucial when talking about 401k compliance and administration.

If you are a Plan Advisor and you want to make a real difference with your clients, helping them audit the operations and details surrounding their census submittal could be a great place to start. If technology is being used to capture, store and submit census data, it is important to audit the engineering of that technology. In addition, if it is people and process that play a heavy hand, then we need to review all of those steps and specifics. It seems to me that most of the time it is a combination of both (tech and people).

Does the technology or settings within the payroll system line up with what is necessary on the 401k side? This important detail often gets overlooked by Human Resources or the people responsible for Payroll. I will give you one simple example of misalignment and then let your imagination run wild with all the other areas that can get screwed up.

Misalignment Example – Definition of Compensation: A Plan Sponsor downloads their payroll file for the full plan year and they send along to the good people handling all their testing and compliance work. What if the payroll file’s column that shows compensation for the individuals includes all compensation (bonus, fringe benefits, gifts, gym reimbursements, etc.) However, the Plan Document is written to exclude some of these additional compensation types. The plan is now at risk of inaccurate compensation numbers being used for testing and other important compliance work.
I am not trying to place the blame on HR or Payroll, those people have a lot on their plate and work very hard. However, I don’t think it is uncommon for some these people to not have a solid understanding of how Payroll Data and the 401k impact each other and how severe this impact can be.

I have created a checklist below of 7 main areas that an Advisor could review with their clients to discover potential problem areas. As I mentioned above, if technology is mostly responsible (payroll feeds, 360 integration, etc.) then I believe the engineering should be audited…..was it set-up right in terms of its impact on the 401k census data? If its people and process that plays a heavy hand, then we need to review all of those steps/specifics.

1. Track the Census – Understanding exactly how the census gets from the Plan Sponsor to the Admin/Compliance Team (TPA or Bundled) is crucial. Track the path the census takes, explore and audit any technology used.
2. Is it coming directly from a payroll feed within some type of Recordkeeper integration?
3. Is the census being downloaded as a file type from the payroll system? Is it a Custom File Type? Is it a Generic File Type that then has to be modified? If modified, who is doing this and exactly how are they doing it
4. Are two or more files being combined to create the final census file? Is this done manually?
5. Is all or any part of the census being completed manually with keystrokes or copy and paste techniques?
6. Does the person responsible for the census submission understand the bigger moving pieces at play here? Do they understand the plan’s definition of compensation? Do they understand potential compensation exclusions? Are they deleting or leaving anybody off the census because they think not eligible or an excluded group? Are they tracking and utilizing re-hire dates properly? Do they understand rules of attribution and making sure that these relationships are being communicated?
7. Are they submitting Deferral and ER Contribution numbers on a cash or accrual basis, do they understand the difference and why?

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