Is Your Payroll Data Accurate and Secure?
Data accuracy is crucial when managing employee benefit and retirement plans. Errors and mistakes can lead to inaccurate deferral amounts, delayed enrollment dates and incorrect calculation of eligible compensation, to name just a few problems.
Much of the data that’s used to manage retirement plans originates with your company’s payroll. Therefore, it’s critical to ensure that complete and accurate payroll records are maintained internally and that proper controls are in place to ensure the security of this data.
You should also ensure that this information and any changes to it are communicated to your payroll processor in a timely manner. Finally, make sure that all plan provisions have also been communicated to the payroll processor.
Maintain Comprehensive Personnel Files
A complete file should be prepared for all new employees, and current and complete personnel files with data for all employees should be kept in one area. The following items should be included in each employee’s personnel file and maintained by an individual who does not have payroll preparation responsibilities:
- Signed and dated employment application
- Form I-9 Employment Eligibility Verification
- Date of hire
- Approved pay rate (updated as changes occur)
- Signed W-4 form
- Insurance and other benefits election forms
- Beneficiary designation form
- Employee’s current address and phone number
- Next of kin’s or other emergency contact’s name, address and current daytime phone number
- Employee evaluations
- Benefit election forms for terminated or retired employees
Take a Deep Dive
Following are a few more key areas to examine as part of your deep dive into payroll controls:
Participant data is recorded in a proper and timely manner:
- Participant forms (such as enrollment, rollover and deferral election forms) should be controlled and maintained for future reference.
- The number of plan participants should be reconciled using enrollment forms and census data.
- Timely auto-enrollment of employees should be monitored using census data.
- Participant demographic data and deferral elections should be updated and reconciled to your company’s personnel and payroll records.
Contributions are remitted at the appropriate amount, and in the appropriate period, on a timely basis:
- Employer payroll records should be compared with contribution calculations.
- Clerical accuracy of contribution remittance schedules should be checked.
- Contribution remittance schedules should be reconciled to the cash receipts ledger and bank deposits.
- Control totals for participant and employer contributions should be maintained.
- Participant contributions should be remitted to the trust within DOL regulatory guidelines.
It’s also important to make sure everyone is on the same page with regard to the plan’s definition of eligible compensation. This is an area where errors commonly occur — for example, if the CFO changes the definition on the plan document but doesn’t tell the payroll processing department.
Avoid Problems Later
Don’t let payroll errors cause problems with your employee benefit and retirement plans. Make plans now to conduct a thorough review of your payroll controls.
Please give our Employee Benefit Plan team a call at 512.610.7200 if you would like to discuss your retirement plans in more detail.