Payroll Integrations Seeks to Tackle Form 5500 Hassles for TPAs

The firm’s TPA Connect is designed to automate year-end Form 5500 compliance testing as a go-between for employers, payroll and recordkeepers.

Payroll Integrations, a startup fresh off a $20 million funding round, has launched a platform for third-party administrators of retirement plans to speed the preparation and use of 401(k) reporting and compliance testing, the firm announced Thursday.

Payroll Integrations’ TPA Connect Platform is designed to automate the process of collecting payroll and census data for year-end compliance testing for Form 5500s or other needs during the year. Partnerships with payroll providers and recordkeepers including ADP, Quickbooks Online, Empower and Transamerica put the firm in a position to solve a longstanding problem for TPAs of tracking down participant data and sometimes going “line by line” over data, according to CEO Doug Sabella.

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Doug Sabella

“This is a fragmented space in terms of data interconnectivity, and this solution allows us to bridge those gaps between entities who are not communicating with each other,” Sabella says.

San Diego-based Payroll Integrations, founded in 2016, connects payroll with employer-sponsored benefit plans, including retirement accounts and health savings accounts, for more than 5,000 companies. Its technology is designed to speed and simplify employee benefits, including onboarding, deferral changes and plan updates, a strategy backed by an investment round of $20 million in November 2023, led by Arthur Ventures.

The new solution for TPAs is “another arrow in our quiver” to address what Sabella and team tout as hours of labor to find and input participant and census data to check equal opportunity benefit compliance and the accuracy of distributions.

“TPAs are often having to go back and forth between the employers, payroll and recordkeeper,” Sabella says. “We’re bringing this historically labor-intensive process into the 21st century,” including software that includes single sign on and an app for users.

TPAs PPSS Inc. and Hunnex & Shoemaker are currently using the 401(k) compliance testing solution, and Sabella notes Payroll Integrations is in discussion with additional partners. TPA Connect is priced for customers on a subscription basis, depending on needs, according to Payroll Integrations.

New SEC Rule Will Require Major Liquidity Providers to Register as Dealers

The targets of the rule likely include major hedge funds trading in government securities as buyers and sellers.

The Securities and Exchange Commission finalized a rule Tuesday that will require market actors that engage in “significant liquidity-providing roles” to register with the SEC and the Financial Industry Regulatory Authority as securities dealers.

The rule will apply to organizations that regularly engage in trading on both sides of a market for the same security in a manner that makes the security accessible to others. It will also apply to those that earn “revenue primarily from capturing bid-ask spreads.”

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The SEC stated that electronic trading has encouraged the growth of unregistered market actors that provide liquidity, when historically that role has been provided by registered dealers. The rule excludes market participants with less than $50 million in assets.

Jay Gould, a special counsel with Baker Botts, says the rule “reaches a pretty narrow set of people,” since many actors involved in liquidity markets are already registered with the SEC. He explains that the target of the rule is likely certain hedge funds that trade Treasurys but do not report certain data to the SEC.

The SEC “wants transparency into these liquidity transactions to understand the scope of the market,” Gould says, so the regulator can understand which actors are providing it and in what amounts, which can help the SEC assess systemic risk through more thorough data collection.

He adds that the rule is consistent with other SEC rules designed to create more transparency in liquidity markets, such as a rule finalized in December 2023 that requires more secondary Treasury transactions to be centrally cleared.

The rule will take effect 60 days after it is entered into the Federal Register.

 

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