Deferral election methods
Deferral election changes are initiated by employees and must be implemented through payroll. There are several ways to process these changes. While some companies use paper forms or utilize their payroll system’s self-service portal to receive and implement deferral election changes, others opt to allow employees to make their deferral election with the 401(k) provider and then process those changes through the payroll system.
Comparison of Options for Deferral Election Changes
Roles & Responsibilities
Employee submits a paper form with deferral election change and employer processes through payroll. Employee can then select/manage investments, set beneficiaries or other related functions through the 401(k) portal.
Employee Self-Service Portal
Employee processes deferral election changes through their payroll company’s employee self-service portal and manages 401(k) functions like managing investments or setting beneficiaries through the 401(k) portal.
Employees can make election deferral changes on the 401(k) portal along with choosing their investments and setting beneficiaries. The designated contact at the employer receives a notification of the change and processes in their payroll system. In some cases (when 360° payroll integration is enabled), the election change would be sent directly from the 401(k) provider to the payroll provider.
How deferral elections initiated on the 401(k) portal are implemented
It is important to note that deferral elections made on the 401(k) portals must still be implemented through payroll by the company’s payroll or HR contact. Notifications of deferral elections made on the 401(k) portal are forwarded to the employer via an email to an address listed on the E-deferral Authorization Form. The person receiving the notifications is responsible for implementing the deferral changes on the payroll system in a timely manner. Ideally, the email address that receives these automated notifications would be a group /department email of a payroll or an HR department so no deferrals are missed.
What happens if payroll contributions do not match the expected contribution based on the deferral election on the 401(k) portal? We rely on the accuracy of data from Plan Sponsors and process contributions according to the file provided with each payroll period. It is the responsibility of the Plan Sponsor to process employee deferral election changes and the responsibility of employees to verify that their individual payroll deductions are correct.
Special notice for rehired employees: Terminated employees generally do not go onto our system to change their deferral elections. As such, at the time of termination, your payroll records will show a 0% contribution and our system will have their prior election. At rehire, if the participant does not actively make a change to that election on our system, no notification will be sent to the sponsor.
Participants are encouraged to review their payroll records/ pay stubs following an election change to verify that their new elections are reflected in their upcoming payroll deductions. It is the Plan Sponsor’s responsibility to implement payroll deduction changes in accordance with Plan Provisions.