Here’s a Secret
So you want to offer a 401(k) plan, but you’re worried that the costs outweigh the benefits? Maybe you’ve heard of the headaches that employers often inherit with the plan? There’s a secret that allows employers to offer a 401(k) plan as a benefit without being completely overwhelmed by the plan administration.
It’s all about choosing the right 401(k) plan solution.
Why Offer a 401(k) Plan?
After health-related benefits, employees most commonly reference a 401(k) plan when looking at desired benefits. However, many employers choose not to offer a 401(k) plan because they believe it is too much of a burden. They simply don’t see the payoff.
Here are a few benefits for employers who offer a 401(k) plan:
- Happy employees = Improved Employee Retention = Cost Savings.
- Employee recruiting.
- A strong savings plan offering like a 401(k) is a valuable bargaining chip during the hiring process.
- Employer Tax Savings.
How 401(k) Plans Become Complicated and Burdensome for Employers
For many employers the cost of administering a plan simply outweighs the benefits. For example, employers with 100 or more employees typically have to pay a fee $10,000 annually (see section above discussing MEP vs. SEP Plan Sponsor Duties).
Elements of 401(k) plans that typically create complexity and burden:
- Employer’s liability of poorly performing investments.
- Fiduciary compliance headaches.
- Employers usually have to deal with a lot of paperwork, compliance communication, and documentation to remain compliant and qualified.
- Hidden and/or back-end fees.
- Setup fees and annual fees.
- Lack of employee buy-in.
The Secret to Avoiding the Hassle of 401(k) Plans
Here’s the secret: Plan Administration Outsourcing.
What does that mean? Instead of going directly to a provider and administering the plan yourself, which means you have all the administrative responsibilities, choose a 401(k) solution where these burdens fall on someone else. This allows you to enjoy the benefits of offering a 401(k) without dealing with the headaches.
This typically means selecting a plan provided by a Professional Employer Organization or other providers that offer 401(k) plan administration outsourcing. PEO companies specialize in providing outsourced solutions for various administrative duties related to HR areas such as payroll, benefits and workers’ compensation.
Here’s how a PEO can offer you a 401(k) plan without the hassle:
You share ownership of the plan, which can offer the fiduciary protection so greatly needed by employers.
With a PEO you just select your plan options and serve as a co-sponsor of the plan.
One Annual Payment
With the Employers Resource PEO solution, you only have to pay one simple and affordable annual enrollment fee.
We take care of the necessary compliance and paperwork, which means no more headaches for you!
Enjoy Better Benefits Without the Hassle
You can benefit from a strong 401(k) plan offering while the PEO takes care of all the work necessary to hold and maintain the plan. This is just one of many examples of how a PEO allows small business owners to offer complex (and sometimes out of reach) benefits to their employees without the usual costs and hassle of administering it themselves.