How Your PEO can Help Set Up Your 401(k) Plans

PRemployer on June 22, 2022

How Your PEO can Help Set Up Your 401(k) Plans

Attracting and retaining top talent is difficult for small businesses that can't offer sought-after benefits like 401(k) retirement plans. Because a 401(k) is only available through an employer, workers look for companies that offer these plans. 

But small businesses face challenges in setting up and administering these plans. Implementing a 401(k) plan is often cost-prohibitive for small businesses. There are many fees associated with these plans, and shouldering that burden often falls to the company, which is already trying to be budget-conscious. Luckily, you have options if you're looking to set up a 401(k) for your business. 

Setting Up Your Business's 401(k) 

Setting up a company's 401(k) is more challenging than simply calling up a provider. You will need to consider: 

  • Whether to offer a Roth in addition to a traditional 401(k) 
  • What investment options you'll contribute to employees 
  • If you'll have contribution limits 
  • If your company will provide a matching contribution and, if so, what percentage  

A 401(k) also comes with administrative fees. You can pass some fees to employees participating in the plan, although that lowers their ability to earn and save for retirement. There are some fees your company must pay, and you may choose to absorb all of the costs to try and attract better employees. 

You will also need to consider which employees are eligible and how long an employee has to work for your company before participating. The sooner you let employees join the plan, the more attractive your 401(k) is to potential employees, but the higher your costs become to administer the plan. You also need to make sure you choose a trustworthy provider, as you'll be handing over large sums of money that your employees will be counting on later in life. 

How a PEO Can Set Up Your 401(k) for You  

A Professional Employer Organization (PEO) is a comprehensive HR outsourcing solution that could be the answer to your 401(k) woes. PEOs can help you handle these responsibilities because they staff experts in retirement planning. These 401(k) experts can help you choose the right plan and help you administer the plan effectively for your organization. These experts can also offer advice on how to tailor your plan to fit your company's needs and help you attract high-quality employees.  

PEOs use economies of scale to help provide a cost-effective solution for 401(k) plans. Because you get access to retirement plans at lower prices, you can offer more and higher-quality retirement plan benefits to your team.  

Implementing a 401(k) plan comes with many challenges. When you partner with a PEO, they shoulder the implementation burden, allowing you to stay focused on your core business needs and sell your retirement plan benefits to potential new hires.  

Choosing the Best Plan for Your Business 

Choosing the best 401(k) plan for your business requires considering numerous factors, all unique to your company and your employees. To ensure employees use your retirement plan benefits, it's a great idea to survey your existing team to see what they're looking for in retirement plan options. You may learn that they're looking for a set it and forget it type of plan that works to grow their money for retirement. On the other hand, you may find that some employees want to manage their retirement more closely, making individual investment decisions on their own. You need to know this to work with the right provider to give your employees the best experience. 

To have an effective retirement plan, you also must ensure that your provider integrates seamlessly with your payroll system. You will need to make regular deductions for any employees contributing to their 401(k) plan from each paycheck. Doing this manually is extremely time-consuming and risky due to the potential for mistakes and errors. 401(k) plans have compliance requirements, so you must be certain you're administering your plan accurately. 

A PEO can help you with this process. They can seamlessly integrate your company's 401(k) deductions with your payroll so that every employee contribution hits correctly every time. Along with retirement plan experts, your PEO staffs payroll experts. These two can work together to ensure a seamless process for you and your employees. They can set you up with the best plan, and suitable investment options for your employee's needs and desires.   

Ensure the PEO you partner with has experience administering 401(k) plans. Not only are there strict compliance regulations around these retirement plans, but you could also face a backlash from employees if their contributions are not made timely or accurately. 

A PEO Can Be the Solution You Need 

As a small business, you want to attract and retain top talent. To achieve that goal, you know that offering a strong benefits package is vital. Part of the benefits package you may consider offering are retirement plans, precisely a 401(k). If your company can provide a matching contribution, you can gain a competitive advantage, making your company even more appealing to potential employees. The best part is that you'll also access high-quality retirement plan options, giving you a competitive benefits package. 

401k for small business: 5 reasons to use PEO


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