HR-XML 3.0 Standards, 2009 September 23.
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There are many possible savings plan integration scenarios. The diagram below depicts one possible sequence of messages, followed by a step-by-step explanation.
Note
The schema/BOD's for pre-payroll and post-payroll transactions are not included in the 3.0 release.The first step is to provision the plan administrator's system with detailed census information for the individuals participating or eligible to participate in the savings plan. This data would typically be sourced from an HRIS. For a large employer, this could involve many thousands of records. This initial population of the administrator's systems would likely be carried out using a series of SyncIndicativeData instances sent through messaging queing or other reliable messaging mechanism. An employer also might use the IndicativeDate schema in the same fashion to update the employee data hosted by a payroll service provider. See the separate document Data Management Guidlines for approaches to handling updates.
The next step is to communicate participant elections to the plan administrator. This is accomplished using the SavingsPlanEnrollment schema. The data communicated tells the plan administrator not just who is eligible to participate (communicated within IndicativeData), but who has actually enrolled in the plan and their choices thereunder. In the diagram above, the transfer of participant elections is depicted as occuring in two "hops" - one between the employer's core HR system and the plan record keeper and one between the plan record keeper and the investment. (see also the section called “Variations and Implementation Considerations”).
The plan administrator receives the participant elections and processes them. Administrator's oversee plan compliance. As mentioned in the section called “Other Considerations: Plan Data and Compliance Testing”, the administrator may have a role in enforcing applicable contribution limits. If contribution-limit checking were done synchronously when a ProcessSavingsPlanEnrollment was received and processed, a rejection of a deferral requests in excess of limits could be communicated back in an AcknowledgeSavingPlanEnrollment. This might also be handled with a NotifySavingsPlanEnrollment message pushed back to the employer system with either a notice that a deferral had been rejected or that it had been modified to be within applicable limits.
After such compliance and error processing is accomplished, the plan administrator prepares payroll instructions to communicate to the payroll service provider. These instructions tell payroll to reduce the employee's pay by the amount of the deferral or otherwise make adjustments in line with deferral elections. The payroll instructions typically include metadata such as a designated start date for the pay reductions, but might otherwise begin the first payroll after the instruction is received if no explicit start date is specified. These instructions are communicated using HR-XML's ProcessPayrollInstructions BOD and applicable data management instructions.
The payroll service provider receives the instructions from the plan administrator and applies them within its system. Payday comes. Each participant's pay is reduced or adjusted in accordance with any new deferral elections they submitted. The amount of pay applied to the savings plan deferral is reflected on the employee's pay check and recorded within the payroll service provider's system. Post-payroll reports of deferrals and deductions related to the savings plan are sent back to the plan administrator using SyncPayrollBenefitsContributions BOD.
The Plan Administrator updates its records of the participant's actual deferrals so it has accurate information with which to administer contribution limits, etc.
Usually several days after the actual payroll, the plan sponsor deposits funds to cover employee deferrals with the investment company. The Plan Administrator usually is involved in calculating the amount of the plan sponsor's liability and in effecting the transfer of the required funding based on the amounts reported within post-payroll PayrollBenefitsContributions reports. These specifications do not address the actual transfer of funds.
Once in receipt of the plan sponsor's funds, the investment company makes deposits to participant's accounts and allocates amounts to investments according to the the participant's elections.
There are many possible variations to the above scenario. Here are a few:
The above scenario relies on the Indicative Data schema for exchanges of participant census data and the Savings Plan Enrollment schema to communicate only participant plan elections. However, the Savings Plan Enrollment schema itself is capable of communicating a wide-range of participant indicative data.
A possible alternative to the pattern depicted above might be to dispense with using the Indicative Data schema and to maintain participant "on the fly" by relying on the indicative data components available within savings plan enrollment schema.
Implementers need to consider which approach makes sense for their situation. Some implementers may use a "thin" Savings Plan Enrollment message that references the participant only by an identifier and that is limited in scope to adding and updating savings plan elections (relying on Indicative Data for participant data maintenance). Other implementers may choose a "thick" Savings Plan Enrollment message that includes detailed participant indicative data.
In the above diagram, savings plan elections are communicated in two hops using the Savings Plan Enrollment schema. Data goes from the employer to the record keeper and then from the record keeper to the investment company. In many cases, at least one of these hops would be eliminated by web-based enrollment hosted by the plan administrator (and/or web-based interfaces for participants hosted by the investment company).
Depending on the type of plan, size of the employer, applicable statutory provisions, and the service offerings of providers, one or more of the above roles may be combined. For example, some payroll service providers offer recordkeeping and plan administration services.
The diagram above shows the HR-XML Indicative Data schema as the mechanism the employer uses to initially provision the record keeper's system. Thereafter, the employer also uses the Indicative Data schema as the basis for maintenance of the participant data (for example, changes to base employee data, such as address, dependents, etc.).The indicative data feeds include detailed census data for all current participants and eligible individuals who may or may not actually elect to participate within the plan.
This detailed feed of census data usually is important in supporting the plan administrator's compliance responsibilities. For example, within the United States and within certain other countries, tax preferences extended to savings plans may depend on the plan being available to, and used by, a broad cross-section of employees -- not just those employees who are highly compensated or who are top managers of the company. Plans may be required to pass so-called "non-discrimination tests," which require complex calculations based on participant data. Thus details such as employee pay levels (whether they are "highly compensated" under appliable tax law), employee percentage ownership (if any), and whether the employees are officers or directors can be required for the non-discrimination test calculations.
Plan administrators also usually oversee and administer compliance with contribution limits. Applicable law may provide tax preferences only up to a given annual contribution limit. This may be an across-the-board limit and/or it may be a limit that applies to a class of participant, such as an owner or highly compensated employee. Thus, applying contribution limits often needs to be done in a way that is informed both by accurate census data and by accurate reporting of prior amounts contributed within the same plan year or applicable period.
Further detail can be found in the separate chapter Chapter 23, Savings Plan Enrollment.