At a TPSU program held at the Thunderbird School of Global Management in the Phoenix AZ area conducted by Adjunct Lecturer Jim Pupillo, the benefits manager of an almost 500-person credit union discusses how auto enrollment can cause compliance liability if the record keeper’s systems are not fully integrated with payroll.
While auto-enrollment is working to boost participation at the credit union with very few employees opting out, the record keeper’s system does not recognize who are the new employees which means the plan sponsor most manually tag those records. Otherwise, employees who should be automatically enrolled will not be raising compliance issues for the plan. It also creates more work for the plan sponsor increasing the potential for human error.
The issue for the Arizona credit union is not necessarily the integration of record keeping and payroll systems, which can be a problem especially with multiple payrolls. The issue is that the record keeper’s system is are not equipped to handle auto-enroll recognizing which are the new employees from the file created by the payroll vendor
And while some payroll vendors that also provide record keeping services will have plan sponsors believe a closed system works best, most of the major record keepers work with almost all significant payroll companies do provide 360-degree integration.
So what is 360-degree integration? 180-degree integration means that the payroll feeds data automatically to the record keeper; 360-degree integration means that changes made by participants on the record keeper’s system is automatically fed pack to the payroll company.
So while the Ideal plan which includes auto-enrollment, auto-escalation, stretch match and target date funds is dramatically improving retirement plans across the country, without the “auto”, it’s just enrollment and can actually increase work and liability for plan sponsors. If your record keeper can’t handle it, then it might be time to look for a new provider.
