Introduction to Payroll Files and Integrations

Welcome to the "All About Payroll" section of the Help Center. Setting up your payroll files correctly from the start and your continued attention to the content and format of your payroll files are critical to your plan’s success. 

Vestwell has created partial or full integrations with several payroll providers, making it easier for us to share files and information with these providers. However, as mentioned in your Plan Services Agreement (“PSA”) with Vestwell, you have ongoing responsibilities to make sure that the content of your payroll and census files is consistent with the features you have selected for your plan and that your files satisfy our formatting requirements. For example, if you have decided to exclude part-time employees from being able to participate in your plan, you are responsible for confirming with your payroll provider that part-time employees are not included on the payroll files sent to Vestwell; otherwise, we will assume they are a full-time employee and take action accordingly, such as calculating their eligibility and enrolling them in the plan after they satisfy your plan’s eligibility rules. 

Additionally, as mentioned in your PSA, we do not independently verify any of the data or files provided to us. It is your responsibility to send us complete, accurate and updated data about your employees and in our required format.  You will need to contact and work with your payroll provider to make sure some of these requirements are completed by your provider as well. 

Due to the specifications of various payroll providers, these content and format requirements vary by provider. It is your responsibility to review the specific requirements for your provider and to fulfill your responsibilities for each payroll and census file and confirm that your payroll provider also understands your retirement plan's features and sets up its system accordingly for us to operate your plan smoothly and consistent with your plan documents and regulatory requirements. We also suggest that you keep your Plan Adoption Agreement Guide and Adoption Agreement available to reference the plan features you selected and your responsibilities to maintain consistency between your payroll files and those plan features.  

Some payroll providers have different requirements to set up an integration, and, in many instances, there may be test files or other actions that need to be completed by the payroll provider for an integration to be considered successful. For these reasons, you should not assume any payroll integration to be fully set up until we send you a confirmation of that.  

If your plan is converting from a prior record-keeper and a payroll provider simultaneously, you must inform us of that because the timing and other activities must be carefully coordinated. A plan cannot go live on our platform until a payroll integration is established correctly; that may affect your desired go-live date, or it could require manual processes. 

Helpful information:

If you haven't read or would like a review of the integration types Vestwell offers, i.e., 180°, 360°, or Payroll Concierge - please read our article "Payroll Integrations Descriptions and Responsibilities."

Setting up payroll integration steps, deferral election change dates, and responsibilities can vary per payroll provider.  Please look for your specific Payroll Integration information here.   As mentioned above, every payroll provider has different integration steps, so please be sure that you review and understand the requirements specific to your provider. 

Plan Design may impact payroll integrations since some features may not be able to be integrated and may require manual input every pay cycle on your end.  If you have any questions regarding your plan design and the integration with your payroll provider, your dedicated onboarding specialist is here to help. Simply "submit a request" on the top right of your help center, and someone will respond within 24 hours. 

Helpful glossary:

We know that retirement plan terminology can be confusing; here are a few words and phrases that we use regarding payroll file submissions.  Of course, just ask us if you have any questions. You've heard the saying: there are no bad questions; it's just bad not to ask the question.

Contributions, Deferrals, and Deductions:  While these are all contributions to a retirement plan, they have slightly different meanings depending on the context. A participant’s contributions to a plan are referred to as “deferrals” of salary or “deductions” from a paycheck. A contribution generally refers to the amount that an employer contributes to the plan, such as a matching contribution.

Payroll Integration: Connecting information and making it easier to transmit files between your company, your providing payroll company, and Vestwell. Our article, “Pay Groups and Their Importance of Operating in My Plan,” will provide you with more information.

Pre-Tax:  A pre-tax contribution is deducted from the employee's paycheck and based on their gross income. A pre-tax contribution will likely reduce the amount of income tax the employee pays during the calendar year in which it is earned; however, they will typically pay taxes on the principal, interest, and other earnings when they withdraw the money in retirement. In addition, if they withdraw the money prior to age 59 ½, the IRS will usually impose an extra 10% tax penalty on the amount withdrawn. 

Here is a simplified example:


Roth: A Roth contribution is deducted from the employee's pay after taxes have been paid; however, the percentage they wish to defer is based on their gross pay. So, if employees A and B make the same amount of income and both contribute 5%, then both employees will have the same amount go into their retirement plan. They just pay a different amount in taxes now. Keep in mind, if employee B contributes with Roth/post-tax dollars, their withdrawals of principal and interest will be tax-free in retirement (as long as the participant is at least age 59 ½ and has had the Roth account for at least five years). 

Here is a simplified example:


As you compare the two charts above, notice that even though the employees in both examples earn the same amount of money and both contribute 5% of their income, the pre-tax contribution reduces their taxable income. As a result, that employee takes home $17.31 more per paycheck.  The examples assume a 20% effective tax for both employees and are hypothetical illustrations.

Pay Group(s): A pay group is a group of employees with similar payment requirements paid in the same pay run. You may have multiple pay groups if your employees are paid on different payroll frequencies and are organized by various departments, locations, or employment classifications. However, if all employees are paid the same pay run, you only have one pay group. (Don't worry. This is a common question and is confusing for many.) For more information, please refer to our article “Pay Groups and Their Importance in Operating My Retirement Plan.”

Plan Sponsor, Employer: Yup, here we go again; these words may be used interchangeably.  Employers are not required to offer retirement plan benefits to employees, but once they do, they are called the Plan Sponsor.  The Plan Sponsor is responsible, among other things, for selecting service providers, if it wishes to have any, to support the plan, such as from a financial advisor or third-party administrator (“TPA”).  

Recordkeeper, Plan Administrator, TPA
A recordkeeper is responsible for the day-to-day operation of your plan. Vestwell is your plan’s recordkeeper, and our responsibilities are explained in Appendix B to your PSA. The law requires all plans to identify a Plan Administrator who is responsible for, among other activities, confirming that all eligible employees were given opportunities to enroll in the plan and approve certain types of distributions.  If you have engaged a TPA for that service, the TPA is your Plan Administrator, and your separate contract with the TPA identifies the TPA’s responsibilities. If you have selected Vestwell to be your Plan Administrator, those responsibilities are explained in Appendix B to your PSA. 

Types of employees: Refers to Highly Compensated Employees (HCEs), Non-Highly Compensated Employees (NHCEs), Key Employees, Non-Key Employees, and Eligible Employees who are participating or not participating.  

Types of Compensation: Includes employees’ gross income, which includes but is not limited to wages, salary, commissions, tips, and bonuses.  For more information, please refer to your Plan Adoption Agreement. Click here for a guide on how to navigate your Plan Adoption Agreement.  


Please remember: Our Help Center has two areas, one for you as the plan sponsor ("Employer Support") and one for your employees ("Participant Support"). So, each time you return to the home page, be sure to navigate to the correct area of the Help Center, depending on whether you're visiting in your role as employer or employee.

From here, you can navigate to the next recommended article, "Active Payroll Integrations," which will list all of the payroll providers we integrate with and allow you to 'click' on the payroll provider you use for important information regarding set-up and maintenance with that provider. Or you may return to our "Home Page."