This article will help answer many of the issues and questions about payroll integrations and non-safe harbor matching.
Do you offer payroll integration?
Yes - we integrate with a number of providers. See if your current (or prospective) payroll partner is listed here.
Does your payroll integration support matching contributions?
Safe Harbor Match
Depending on your payroll partner and our integration level, we may support safe harbor contributions via your payroll.
→ If your payroll partner supports a 360* integration with Vestwell, Vestwell will manage not only payroll ingestion but also set and update your employees' deferral savings rates in your payroll system. If you intend to fund your safe harbor matching contributions each pay period, Vestwell can also set the safe harbor matching contribution rate for those employees in your payroll system.
Note that a few such payroll partners may require that your safe harbor match be a single-tier (e.g., 100% of the first 4%) formula to be supported; please confirm with your payroll contact whether your payroll system supports your intended safe harbor formula. If not, you may either adjust your match calculation period to be based on the end of the year or consider changing the formula (may have timing restrictions). Both may require an amendment to your plan document.
→ If your payroll partner supports a 180* integration with Vestwell, Vestwell will manage your payroll ingestion. Since Vestwell is not permitted to manage your employees' deferral savings rates in your payroll system, you will need to manage employees' deferral savings rates as well as any correlated matching contribution rates. If you choose to fund your safe harbor matching contributions via payroll, you will need to confirm how the match is set up in your payroll system (whether at a global level or if you need to adjust each individual's match rate when their deferral savings rate is updated). Once the match is set up in your payroll system, Vestwell will ingest and process recognized employer contributions reported in your payroll file.
Non-Safe Harbor Match (Discretionary or Fixed)
Our payroll integrations do not support setting or reviewing discretionary or fixed-non-safe-harbor matching contributions.
→ If your payroll partner supports a 360* integration with Vestwell, Vestwell will manage not only payroll ingestion but also set and update your employees' deferral savings rates in your payroll system. However, Vestwell cannot set or adjust matching contribution rates for employees via your payroll system.
Suggested Approach:
Elect for a match calculated (per your plan document) at year-end. You may choose to calculate the match during the year (e.g., on a quarterly basis) to help with cash flow and encourage your employees to save, and then upload an off-cycle contribution (here's how) at the end of the plan year. Please note, a smaller amount may be due at/after year-end as a 'true-up' contribution for employees with variable savings or compensation throughout the year, but it helps smooth your cash flow and employee deposits. Alternatively, you can have Vestwell calculate the match as part of the year-end process and fund it before your company tax filing deadline.
Alternate Approach:
You may still set up your payroll with a pay period match, and Vestwell will process any match detected in the payroll file upon ingestion. However, a few words of caution:
→ If your payroll partner does not allow you to set the match formula at a 'global' level, meaning you have to update and monitor the match rate set for each employee, it will be very difficult to manage. Keep in mind that with a 360* integration, Vestwell is setting the deferral rate for your employees every pay cycle, and you won't receive a notification to take action.
→ If your payroll partner does allow you to set a match formula at a 'global' level, ensure that every employee eligible to save in the plan is also eligible for the match (which is how plans typically operate at Vestwell) and that you have a process in place to check-in that it's operating as expected throughout the year. It's much harder to correct deposits made than to adjust calculations in payroll before an issue grows.
→ If you use certain payroll partners, you should not set the match at all (or the integration will break). Currently, the only known issue is with QuickBooks Online. Please review the payroll partner-specific Help Center pages to confirm limitations.
→ If your payroll partner supports a 180* integration with Vestwell, Vestwell will manage your payroll ingestion. Since Vestwell is not permitted to manage your employees' deferral savings rates in your payroll system, you will need to manage employees' deferral savings rates as well as any correlated matching contribution rates. If you choose to fund your non-safe harbor matching contributions via payroll, you will need to confirm how the match is set up in your payroll system (whether at a global level or if you need to adjust each individual's match rate when their deferral savings rate is updated). Once the match is set up in your payroll system, Vestwell will ingest and process recognized employer contributions reported in your payroll file.
Note that non-safe-harbor match contributions will not be ingested on a pay period basis if they are in addition to safe harbor matching contributions.
If you're able to connect to my payroll to manage my employees' deductions, why can't you manage the match we want to provide them, too?
We hear you! We know that you want to encourage your employees to save for retirement and get the most out of the benefit you're providing to them. Vestwell aims to provide more robust support for matching contributions in the future. We'll be sure to let you know when this is coming to a payroll integration near you.
In the meantime, here are a few ways you can manage your matching contributions:
- Elect for a match that is calculated (per your plan document) at year-end.
-
Pre-fund on a less frequent basis:
You may choose to calculate the match during the year (e.g., on a quarterly basis) to help with cash flow and encourage your employees, and upload what we call an off-cycle contribution (here's how); a smaller amount may be due at/after year-end as a 'true-up' contribution for employees with variable savings or compensation throughout the year, but it helps smooth your cash flow and employee deposits. -
Fund on an annual basis:
You may choose to have Vestwell calculate the match as part of the year-end process (overview) and fund it before your company tax filing deadline.
- Set up and manage the employer match formula via your payroll system, and calculated amounts will be deposited by Vestwell if detected via the integration setup.
- Be careful not to set up a non-safe-harbor match for QuickBooks Online, or the integration will fail; for other payroll partners, please be sure to review the most up-to-date. information here.
- Explore whether your payroll partner allows you to set the matching rate at a 'global' level;
- Ensure that every employee eligible to save in the plan is also eligible for the match (which is how plans typically operate at Vestwell); and
- Have a process in place to check that it's operating as expected throughout the year.
We have matching contributions set up in our payroll -- why aren't they showing up at Vestwell?
We work with a number of payroll providers to align the format of their data made available to us to payroll data that we ingest; in some cases, there is significant variability in the way that clients of the payroll partners can set up their deduction codes and calculations, which can result in the match or other employer contributions not being recognized in Vestwell's integration setup.
If your matching contributions are in addition to safe harbor matching contributions, these will not be ingested by Vestwell at this time.
If your payroll partner is calculating the match every pay cycle and it's not being picked up by Vestwell, Vestwell's Client Success team can work with you to submit these YTD amounts on a quarterly or annual basis.
You've mentioned the plan document a few times and when I want to fund the match. What do these mean, and what are my options?
Glad you asked! Your plan document is what drives the legal determination of how your plan works and may come with some timing flexibility. Let's dive in:
*Typically, if a match is calculated each pay cycle, it's best to fund it each pay cycle if supported. If it's not supported by your payroll partner or through the integration with Vestwell, an annual match period may be more appropriate for plan document and calculation purposes.
Glossary (lite):
- Safe harbor match: a match intended to meet certain regulatory requirements to help you bypass certain non-discrimination tests; these come with fixed formulas, a promise to employees, and limited vesting options.
- Discretionary or fixed-non-safe-harbor match: a more flexible match, these might allow for flexibility in how much to match or whether to match at all; or the fixed formula is not as stringent as the safe harbor requirements; you won't get out of the required testing, though!
- Per pay period (document defined): the matching contribution is calculated for every pay cycle, based on the employees' savings amounts and compensation amounts for that period.
- Annual (document defined): the matching contribution is calculated for the plan year, based on the employees' savings amounts and compensation amounts for the whole year.
- True-up: if you fund (make deposits for) a match or other contribution more frequently than its calculation period, you may have adjustments to make at the end of the year (or another calculation period). The calculation is performed for the defined period, and any shortfalls in what was deposited to date are now due.
If you have any questions please reach out to clientsuccess@vestwell.com