Employers today need to be competitive about their employee benefits to attract talent and retain their best employees. One of the most important benefits an employer can offer is a 401(k) plan. Candidates often think about their financial futures when considering a new employer, and a 401(k) plan helps them to prepare.
But a 401(k) plan can be a lot to manage, and smaller employers are not always able to administer these programs. How do you offer these desirable benefits while keeping your business affordable? The answer is to partner with a PEO.
The PEO Advantage: Your 401(k) Partner
When you work with a PEO, you enter a co-employment relationship. You will still retain oversight and decision-making power over your company, while the PEO handles things like HR services, compliance, and payroll. For many small to mid-sized businesses, this is a hugely beneficial relationship. It also has the added benefit of reducing costs for employee benefits, as the PEO pools your employees with the other companies it has already partnered with, making the buying power much stronger.
The importance of offering a 401(k)
When it comes to a 401(k) plan, how can a PEO make a difference? A PEO can offer you more affordable employee benefits than you could get on your own. Buying health insurance for 10 employees will have more associated fees than buying health insurance for 500 employees, and this is a huge reason many employers choose to partner with a PEO. This same reason comes into play when considering a 401(k) plan. The more plan participants you have, the less you will pay in fees, so your 401(k) plan will be more cost-effective with the help of a PEO.
Another significant benefit is that the PEO sustains the financial liability of the 401(k). When you sponsor a retirement plan, you have fiduciary liability. As a retirement plan sponsor and a fiduciary, you can be at personal risk of penalties, lawsuits, and fines If you fail to comply with all regulatory measures. When you utilize the 401(k) plan your PEO offers, you do not have this responsibility. The PEO will be responsible for all maintenance of the 401(k) plan, including maintaining ERISA** fidelity bond coverage, recordkeeping, and compliance monitoring. It is a lot for a small business to maintain on its own, but a PEO is uniquely positioned to specialize in these services. The PEO will have a team of experts in place to keep the retirement plan running smoothly, and you will not have to worry about it.
Be aware if your state has mandated retirement plans
Not only are job candidates worried about their retirement plans, but so are state officials. States have begun to mandate retirement plans, meaning that employers may no longer have a choice about offering a 401(k). More than 30 states have considered this legislation, and many of them have either passed the legislation pending launch or have already signed it into law. To comply with these new laws, businesses will have to sponsor a retirement plan for their employees and incur the costs, administrative tasks, and compliance needs. This is not feasible for many employers, which is why partnering with a PEO is a great solution.
Should I match my employee’s 401(k) contributions?
Offering retirement benefits can help to ensure that your team members are committed for the long run if you decide to match their contributions. It is not required, but many companies offer a certain percentage of matching contributions. It is also a very convincing tool for recruitment. A recent study reported that, for 45% of respondents, a 401(k) match was a deciding factor in whether or not a candidate took a job offer. Often, these contributions are only offered after the employee has been with the company for a certain amount of time, for example, after their first year. This gives your employees an incentive to stay with you, and the longer they stay, the more their 401(k) plan contributions will grow. It is a very effective way to encourage your employees to stay with your company. Plus, the employer gets a benefit as well – the matching contributions are tax-deductible! You can deduct the amount you matched from your company’s taxable income, which can be very profitable. It is a win-win situation!
Partnering with a PEO makes business stress-free
For the retirement benefits, and for so many other reasons, partnering with a PEO is the right choice for small to mid-sized businesses. A PEO removes so many of the headaches of running a business, like HR services and onboarding, acquiring affordable and competitive employee benefits, figuring out how to stay compliant with the latest legislative updates, and the struggle of managing payroll. If you’re ready to experience the PrestigePEO difference, we’d love to talk! Contact us today to learn more about what we have to offer your business.
