Census data… I know, exciting! But seriously, before you hit “send” on your employee census to your third-party administrator (TPA) or auditor for testing, double-check the details. An accurate census is the foundation of your 401(k) plan audit, leading to reliable compliance testing, sound audit outcomes and a smoothly administered plan.
In a perfect world, we wouldn’t even mention this report—except that errors or omissions in data occur much more frequently than you’d expect. These errors or missing data can delay testing, add more work, and create discrepancies that require restructuring payroll or contributions later in the year.
To make it easy, we created a handy-dandy checklist (below) so you can quickly review your census for the most common discrepancies that we see.
But first… What’s a census?
Typically generated from your payroll system, a plan census is a comprehensive year-end data file that lists every employee employed during the plan year and includes the demographic, employment, and compensation information needed to administer and test your 401(k) plan, such as:
- Hire and termination dates
- Date of birth
- Hours worked (if applicable)
- Gross and plan-eligible compensation
- Employee deferrals
- Employer contributions
- Ownership status.
Your TPA uses this data to perform eligibility, contribution, and nondiscrimination testing, and your auditor relies on it to verify compliance and reconcile plan activity. In short, the census is the data backbone of your plan’s annual compliance process — and its accuracy directly impacts the reliability of your testing and audit results.
✅ Reconcile to payroll and W-2 totals
One of the most essential steps in preparing your census is reconciling compensation figures against your payroll records — particularly the year-end payroll data like your W-2/W-3 totals. Matching totals such as:
- gross wages,
- compensation per your plan’s definition
- employee deferrals
This ensures that your census reflects the full payroll picture and helps eliminate discrepancies before testing begins.
Pro Tip: If gross wages or deferral totals don’t align, investigate whether items like pre-tax contributions or exclusions per the plan document are causing the variance.
✅ Include every relevant employee
Your census should include every employee employed during the plan year, not just those actively participating in the 401(k) plan. That means:
- Active employees,
- Terminated employees with activity during the year,
- Part-time or seasonal workers,
- Employees on leave, and
- Rehired employees (with separate hire, termination, and rehire dates, if applicable).
Accurate termination and rehire dates matter — they help determine service, eligibility, and vesting and ensure that your TPA and auditor properly classify each employee for testing.
Pro Tip: Missing or vague dates can lead to classification errors or unnecessary follow-up questions—so do your best to avoid these.
✅ Verify Demographic and Identification Details
Take time to confirm basic demographic fields for each employee:
- full legal name
- Social Security number
- date of birth
- hire date
If it feels like we’re repeating ourselves, we are! Correct demographic data ensures proper testing populations and reduces the risk of matching issues between systems.
Pro Tip: Don’t let the mundane details fool you! Even small mistakes in identifying information can cause major headaches during testing and audit procedures.
✅ Check Employment Status and Hours
For eligibility and nondiscrimination testing, your TPA needs accurate employment status codes — active, terminated, on leave, or rehired — and, when relevant, a count of hours worked (e.g., 500 hours in a measurement period, like a year).
Pro Tip: Since vesting and eligibility often depend on service requirements, incorrect or missing hours can lead to false eligibility classifications or failed tests.
✅ Communicate With Your Payroll Provider
Your payroll system is often where the most up-to-date employee data lives. Coordinate with your payroll vendor or internal payroll team to ensure you extract the most accurate and complete census file possible.
Pro-Tip: Run the census report after your final year-end payroll; include it as part of your annual closing tasks. This ensures that year-end adjustments and final payroll entries — like bonuses, corrections, or retroactive changes — are included.
A thorough pre-testing review of your census not only reduces the risk of surprises during compliance and audit procedures but also demonstrates strong fiduciary oversight. Taking these steps before submission empowers your TPA and auditor to work efficiently — and helps you stay ahead of potential compliance issues.
You work hard to keep your 401(k) plan well-documented and in compliance, from the census on. You deserve to have an audit team that supports you with the same level of care and commitment! If you’re looking for a new firm to handle your next 401(k) plan audit, consider and contact Cassell Plan Audits today.
Photo by Towfiqu barbhuiya
