PEOs offer employers an advantageous means to offer lower cost retirement plan services through collective buying power. Unfortunately, pooling employees to get the best pricing may not always be the optimal solution – nor may it even be in their employees’ best interest.
A 401(k) is one of the most sought-after employee benefits, and for good reason: it allows workers to set aside tax-deferred funds toward their retirement goals while building loyalty among employees – both essential factors in attracting and retaining top talent. Unfortunately, businesses that don’t offer retirement plans usually cite costs as the reason; but by working with an outsource provider like PEO who offers comprehensive HR outsourcing solutions instead, small businesses can enjoy all these advantages without the substantial price tag attached.
By taking advantage of economies of scale, a Professional Employer Organization can offer clients a 401(k) plan at reduced cost compared to standalone plans and possibly providing more diverse investment options and professional management than smaller business-only plans.
PEO 401(k) plans offer additional features not found with other plan types, such as profit sharing or match contributions, that can boost employee morale and give companies an edge when competing for talent. These benefits may help promote employee retention.
Importantly, PEO 401(k)s fall under the category of multiple-employer plans, which involve retirement savings plans used by multiple unrelated employers administered by a third party. As such, their fiduciary duties must include annual discrimination audit testing, loan dedication and review as well as self-harbor contribution reconciliation reconciliation reconciliation as required.
An effective PEO can alleviate these responsibilities for business owners, making sure their plans comply with regulatory guidance while freeing up time to focus on growth. In addition, annual report filings and administrative tasks are handled without breaking up HR teams from their primary duties.
PEOs go above and beyond traditional 401(k) services by offering comprehensive retirement planning for their clients, including offering alternatives like Simplified Employee Pension (SEP) and Savings Incentive Match Plan for Employees (SIMPLE). Further, they provide financial planning resources that connect employees to experienced professionals for optimal retirement savings and reaching goals. This enables employees to maximize retirement savings and meet their desired objectives. Small businesses can benefit from using PEOs to increase employee retention rates, attract top talent, and make retirement plans much more user-friendly for both employer and employee. To find out how a PEO can save your company money on retirement expenses, reach out to an independent consultant today!