Accurate Data On Your Employees Is Essential For Your Retirement Plan

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Why do HR departments ask new employees for their personal information? As you probably know, organizations and companies need to maintain accurate information on employees for HR, accounting, and possible legal requests.

The same is true for your 401(k) or 403(b) plan. It is essential that you are continually supplying your retirement plan provider with up-to-date information and census data of all your eligible employees. So, what are the benefits of making sure your plan participant information is accurate and timely?

(1) Accurate Information Helps You Meet Your Fiduciary Requirements

As a fiduciary of your organization’s retirement plan, you must act in the best interests of your plan participants. Therefore, keeping correct information about your plan participants is critical and part of your responsibility, including all the information required in the employee census data file.¬†

Imagine if you failed to include one of your employee’s contact information in your retirement plan census. This person may not receive a necessary security code or pin to select their investment options, beneficiaries, etc. By preventing your employee from accessing their account, you could be violating the 404(c) rule of the Employee Retirement Income Security Act of 1974 (ERISA). For additional information about your fiduciary responsibilities, go to https://www.dol.gov/general/topic/retirement/fiduciaryresp¬†

(2) Accurate Information Helps You Reduce Compliance Risk

Whether your retirement plan has 10 or 1,000 employees, it’s crucial to have an efficient process to track and provide your retirement plan provider with census data. Auditors rely on employee census information when reviewing a plan. Recordkeepers require the employee census when processing transactions. And, Third Party Administrators need the employee census to perform annual compliance and nondiscrimination testing.

Missing data can have significant consequences. For example, if the hire date is missing, the contribution cannot and will not be executed, which may delay the entire payroll upload and impact other employees. Also, if a termination date is not entered, then a termination distribution request may not be processed. If the date of birth is blank, we cannot determine the participant’s eligibility or enforce the plan document’s terms.¬†

(3) Accurate Information Avoids Security Issues

Outdated information can create unnecessary security risks for you and your participants. For example, suppose you don’t update the status of an employee who is no longer employed. In that case, you could expose them to a fraud attack since their account will still be active. However, as a plan administrator, you can easily update employee information online. In addition, plan participants can also go online and ensure their data is correct.

(4) Accurate Information Establishes Benchmarks and Provides Insights

Participant data is the backbone of reports that allow you to gauge the health of your organization’s retirement plan. This information creates opportunities for collaboration between employers, plan administrators, and plan providers. For example, your plan provider can offer recommendations based on your plan participation data.

Plan metrics also help you identify issues and make better plan decisions. However, if this information is inaccurate, then your understanding of your plan can be skewed.

(5) Accurate Information Saves Your Plan Money

Similar to how a healthy lifestyle can reduce future medical costs, maintaining correct data will reduce later administrative problems. Your time is valuable. Implementing routines to support accurate information will eliminate confusion and frustration later. Such habits are especially beneficial when there are staff transitions within your plan administration.

Many Third-Party Administrators and Recordkeepers charge a very high ancillary cost for correcting errors made by plan sponsors on required forms. These mistakes put your plan at risk of being disqualified by the DOL and IRS. Reversing some errors could take years and require costly litigation.

Conclusion

Accurate plan participant information leads to good decisions, avoids risks, and reduces your time and costs. If you need guidance on developing routines for maintaining correct data, please reach out to Envoy Financial’s plan specialists at (888) 879-1376.