Every year, your TPA probably asks you for census information, and every year, someone at your company probably treats it like another annoying administrative task.<\/p>\n
It isn\u2019t.<\/p>\n
The census is more important than you think because so much of your 401(k) plan\u2019s annual compliance work depends on the information you provide.<\/p>\n
Dates of birth. Dates of hire. Termination dates. Hours. Compensation. Ownership. Employee classifications. Deferrals. Employer contributions. All of that information can affect testing and plan administration.<\/p>\n
Garbage in, garbage out.<\/p>\n
Your TPA can be the greatest TPA in the world, but if you give them incorrect information, they\u2019re going to produce results based on incorrect information. A missing employee could create a coverage issue. Incorrect compensation could affect allocations. Wrong ownership information could affect highly compensated or key employee determinations. A bad hire date could hide an eligibility problem.<\/p>\n
The dangerous part is that the results can look perfectly legitimate.<\/p>\n
A compliance test doesn\u2019t necessarily flash a giant warning sign saying the census information was wrong. The test simply works with the information provided.<\/p>\n
That\u2019s why plan sponsors should have a process for reviewing census data before sending it to their TPA. Don\u2019t simply download something from payroll and assume it\u2019s correct.<\/p>\n
Compare the information against HR records. Make sure terminated employees are included when required. Identify owners and family relationships. Explain unusual employment situations. If you acquired a company or added a related business, tell your TPA.<\/p>\n
Your annual census isn\u2019t busywork.<\/p>\n
It\u2019s the foundation for much of your plan\u2019s compliance work.<\/p>\n
If the foundation is wrong, everything built on top of it might be wrong too.<\/p>\n
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