As HR/Payroll outsourcers look to continue to attract more and in some cases smaller businesses to their outsourced model they increasingly look to build data integration with third party systems to gain efficiencies and drive down costs. Thus the intersection between Human Resource/ Payroll software and retirement services recordkeeping software (plan administration) is heating up.

ADP and Paychex market 401(k) recordkeeping systems that exchange data with their HR/Payroll software seamlessly. This data exchange clearly has become a key value proposition for these firms. From a benefits or HR manager’s prospective the ability to enter new or terminated employee information once into their HR/payroll and then have that data automatically recorded in the retirement services record keeping software is a significant advantage as it eliminates redundant data entry, unsynchronized data sets, system omission errors and saves time and has a clear return on investment. In addition, as the system of employee record the HR/Payroll software has the ability to automate a census output to the 401(k) TPA and advisor which is a major time saver for the HR/Payroll administrator. The TPA and advisor have the ability to record which employees are terminated and when, as well as have access to this information in a timely fashion. For firms that perform plan administration; including compliance testing, employee deferrals and loans, etc. having ready access to the payroll data allow 401(K) plans to run more efficiently.  In addition, the definition of compensation for plan purposes is not always the same as for payroll so access to the full year compensation figures is significant.

HR/Payroll companies such as Ceridian and Paylocity who do not have 401(k) offerings have begun to partner with record keepers with software platforms such as Aspire Financial and investment firms that have a robust recordkeeping platform such as Great West and ING to offer the advantages that an integrated system offers in order to compete with the likes of ADP and Paychex. Even regional payroll companies like Balance Point Payroll in New Jersey have payroll and 401 (k) administration data exchange with Great West and other providers.

TPA, and now advisers, have begun to understand that he who controls the payroll (census) controls the sponsor, something payroll companies understood some time ago.

As a result, some third party administrators have started their own in-house payroll businesses.

As an independent financial adviser should you consider working with one of the national payroll providers such as ADP and Paychex (which have advisor products and partner programs) or a regional HR/Payroll company that is strictly focused on the needs of local businesses? A good place to start might be to ask your current and prospective clients how they process payroll and then explain the benefits of data exchange to gauge interest. Your firm will want to perform its own due diligence process to determine the level of customer service that the payroll provider offers and its client satisfaction scores. Partnering with an HR/Payroll provider or multiple providers is clearly a way to offer vale to your clients.

Stewart Feller is the Vice President Retirement Planning Solutions for AEPG Wealth Strategies ( an advisory firm in Warren, NJ and is the former 401K Program Manager for Ceridian in the US.

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