All Retirement Plans are Outsourced - Choose a PEO for Yours!

PRemployer on January 22, 2024

Use a PEO for your retirement plans

Retirement plan management is a labor-intensive process that demands significant resources. Today, most companies outsource retirement plans to minimize the burden on the HR team and maximize benefits for the workforce.

The hardest part of retirement plan outsourcing is finding a reliable partner. A professional employer organization (PEO) can help set up and manage your retirement plan and other administrative HR tasks that contribute to higher retention rates.

In this post, we'll look at PEO retirement plans and explore how you can put all your HR solutions under one umbrella.

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How Companies Get Retirement Plans

Many companies that offer retirement plans don't handle this task internally. Instead, they outsource all relevant activities to a plan manager. While the company itself is a Plan Sponsor that sets up a retirement plan for its employees, it usually doesn't have the time, resources, and knowledge to manage this plan effectively.

A plan manager or administrator is a company or an individual who is responsible for:

  • Enrolling employees in the plan
  • Dealing with contributions and distributions
  • Ensuring compliance with regulatory requirements (e.g., Employee Retirement Income Security Act)
  • Responding to inquires

Retirement plan managers are essential to successful and compliant fund distributions. As a Plan Sponsor, the company carries fiduciary liability to run the retirement plan solely in the interest of the employees. They become responsible for administering payments on time and managing risks effectively.

Access 401(k) with Other PEO Benefits

Fiduciary liability, coupled with the complexity of plan management, can make it hard for a company to establish a retirement plan successfully. A PEO provides an opportunity to outsource the administrative part of retirement plan management to a team of experts.  

A partnership with a PEO allows you to join a co-employment relationship where you can share fiduciary liability. All shared responsibilities are described in the client service agreement. It lets you delegate specific retirement plan management tasks and liabilities to the partner, saving your company money and time by leveraging their expertise.

Even if you already outsource 401(k) plan management, you may want to consider switching to a PEO collaboration. Besides sharing liability and getting top-notch management services, you can take advantage of other benefits offered through the PEO. They can take over administrative tasks, provide access to higher-tier health benefits, streamline recruitment, and more. You enter a comprehensive partnership that optimizes your HR operations and boosts productivity.

Consolidate Savings Under One Roof

The PEO becomes a co-sponsor of the retirement plan, allowing you to keep retirement costs low. Professional employer organizations are multi-employer plan sponsors, and after partnering with them, you and your employees become a part of the multi-employer plan that covers all employees of PEO clients. The PEO is able to keep costs lower because they leverage economies of scale to dilute plan costs and management across a broader pool.

A PEO also uses the same approach to offer you access to Fortune 500-level health plans that allow you to offer your workforce better health benefits and become more attractive to top talent. The same works for worker's compensation insurance and healthcare benefits, as economies of scale also allow PEOs to negotiate lower premiums for those.

Other ways a PEO can help you save money include:

  • Sharing high-quality HR software –PEO tech solutions can streamline your HR tasks by making it easier for your existing staff to access their benefits
  • Avoiding fines and penalties associated with non-compliance – PEOs monitor all ever-changing laws and regulations and make sure that you remain compliant
  • Streamlining administrative HR tasks – PEOs take over most administrative HR tasks, allowing your HR team to focus on money-saving activities

A PEO can help you free up significant internal resources and use them to improve your recruitment process, workplace environment, and employee satisfaction rates.

Many companies try to save time and money by outsourcing different elements of HR administration to several third parties – but that only complicates the process, leads to errors, and minimizes savings. With a PEO, you get a comprehensive HR outsourcing solution that you can tailor according to your company's changing needs.

Support Your Staff in Every Way with a PEO

While a PEO can help you save on 401(k) plan management and administration, it can also take the burden of administrative tasks off your entire HR team. Meanwhile, you gain access to the expertise and experience of HR specialists who can streamline the HR strategy, optimize recruitment, and support your workforce.

Besides helping your HR team achieve its goals, a PEO helps all your employees. By offering advice, improving payroll processing, providing training, and much more, this organization contributes to your company's success.

A PEO retirement plan is just the beginning. You can outsource multiple aspects of HR while remaining responsible for all the major decisions. After entering a co-employment agreement, you can share liability while maintaining control over all your HR activities.

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