In a competitive job market, it can be challenging to find and retain the best possible talent. Offering a quality and affordable retirement plan can help. In fact, as many as 81 percent of employees indicate retirement benefits are a key focus of their job searches.Yet sponsoring a retirement plan is not only a lot of work, but it can be costly as well. One way to bring this important benefit to your employees, without straining your business, is with the help of a professional employer organization (PEO). Here are some of the benefits you will enjoy with a PEO retirement plan.
1. Lowered Costs
All retirement plans have a cost, and some companies will pay as much as $25,000 for someone to administer their plans. Employees have to shoulder some of these costs as well, and they start to add up quickly. For a 401(k) plan, for example, you may pay asset-based fees to cover the annual upkeep of the plan. The fees can equal up to 3% of the total assets held. Regardless of the fee structure, cost can be one of the primary barriers for small businesses to offer these plans.
Partnering with a PEO helps to reduce plan costs. PEOs have the ability to leverage economies of scale to get retirement plans at a more competitive cost. Put simply, your PEO partner can pool clients together in one plan to negotiate lower rates. At PRemployer, for example, this allows us to keep fees around 1% for all clients, regardless of their assets. Your employees benefit through better retirement options.
2. Reduce Your Liability
When an employer sponsors a retirement plan, he or she takes on a high level of responsibility for that plan. This is known as fiduciary liability. If you fail to meet the responsibilities in the Employee Retirement Income Security Act (ERISA), you could be sued or subject to other serious consequences.
When you use a PEO retirement plan, you transfer some of that liability to the PEO. These businesses have extensive experience managing retirement plans, protecting you from personal liability as well as upholding fiduciary responsibility for the retirement plans. This allows you to offer the plans without undue risk.
3. Compliance Is Guaranteed
Retirement plans must meet government rules and regulations, and the plan’s sponsor is responsible for making sure that happens. Because government regulations are constantly changing, this can be an overwhelming part of the process.
Also, every year you must undergo testing and auditing to ensure your retirement plans are still in compliance with the latest regulations. This adds to the time and money spent on retirement plans, as audits can cost between $6,500 and $13,000 depending on various factors. A PEO partner’s job is to stay informed about these changes, so your business can maintain ongoing compliance.
4. Fewer Responsibilities
Retirement plan sponsors have many administrative tasks, including:
- Designing the plan
- Authorizing transactions
- Record keeping
- Monitoring expenses
- And more
A PEO takes over the administration of the plan, allowing business owners to focus on running their businesses. For the PEO, these tasks are routine, so they are easily handled without hassle and frustration. Since administration can cost $8,000 to $25,000, reducing the responsibilities also lowers the cost of the plan.
5. Total Customization
Each business is unique and has distinct needs. That means retirement plans should be specially tailored to each business’s individual needs. This is not easy to do when working on retirement planning while running a business, but a PEO retirement plan is easily customizable.
Some of the items that can be customized include eligibility schedule, enrollment mechanisms, opt-out options, profit sharing, and the investments in the plan. The PEO partner can help you evaluate the needs and desires of your employees, then create a customized plan to fit.
A PEO retirement plan brings tremendous value to your business. From lowering costs to increasing employee retention, all while making your job easier, a PEO retirement plan is a smart move. Learn more about PRemployer and how they can help your business through retirement savings plans and other quality employee benefits.