Aside from salary, the biggest complaint employees have today is the lack of a comprehensive benefits package offered by their employer. One of the largest components of a stellar benefits package is retirement plans.
A Professional Employer Organization (PEO) takes the hassle out of providing retirement plans to your employees. A PEO is an HR outsourcing company that provides comprehensive benefits plans for your employees. This is just one of the many benefits of HR outsourcing with a PEO.
Why is it important to offer retirement plans to employees?
Offering a stellar benefits package helps your company attract and retain top talent in your industry. Part of a comprehensive benefits package is a retirement plan.
By setting your company up with a retirement plan, you put yourself above the competition. This competitive advantage will make your employees more loyal to your company and less likely to look for employment elsewhere. A direct result of your decision to offer retirement benefits means your company ends up with a lower turnover and reduced costs to hire.
What is a PEO retirement plan?
A PEO retirement plan is a retirement package designed and administered by a Professional Employer Organization. Retirement plans often get a bad reputation for having high costs and only being available to Fortune 500 companies. Despite most employers thinking that retirement benefits are simply too expensive, your small business may be able to provide what your employees want at costs you can afford. By partnering with a PEO, you have options.
A multi-employer plan (MEP) is a type of retirement plan offered by a PEO. It's called multi-employer because all of the PEO's clients, the small businesses that partner with the PEO, get access to the retirement benefits.
The United States Department of Labor (DOL) regulations state that only bona fide PEOs can provide a MEP to their clients. To satisfy this requirement, any clients of the PEO who take part in the MEP must have at least one employee, other than the company owner, who participates in the retirement plan offering.
In addition, the PEO must perform substantial employment functions on behalf of your company. PEOs achieve this requirement through co-employment. A co-employment relationship does not mean you lose any control over the day-to-day operations of your business. This relationship makes your chosen PEO the employer of record for your employees, giving them the power to handle payroll, tax remittance, and provide and administer benefits. Essentially, this enables small businesses to offer big company benefits.
Just because your PEO partner has dozens of other small business clients does not mean your retirement plans all have to look the same. You have full discretion to choose what makes an employee eligible for your retirement plan, including:
- Age limit
- Enrollment window
You also have full control over whether your company offers a match to any contributions your employees make to their individual retirement accounts. You can choose a:
- Discretionary match
- Safe harbor contribution
- Basic employer contribution
Your company's retirement plan is entirely customized to your specific needs. Your PEO guides you through the entire selection process.
What are the advantages of a PEO retirement plan?
Offering retirement plans through a PEO has many advantages. HR outsourcing with a PEO can give your business a positive ROI while giving your employees exactly what they want.
Selecting plans and funds for retirement accounts come with fees. Many employers choose the pay for those asset management fees. The smaller your company and the fewer employees you have participating, the higher the fees.
With a PEO, there may be tens of thousands of participating employees. Your company gets the benefit of lower fees because so many people participate in the plan.
You also do not need to hire a CPA to handle an annual audit. Your PEO manages that entire process for you, ensuring that contributions and deductions are made correctly.
Retirement plans are subject to federal and state laws. A PEO takes responsibility for keeping your retirement plan compliant, even if your company has made many customizations to the plans.
Your PEO will also handle all reports and disclosures. These pieces of the compliance puzzle can trip up even seasoned HR employees. By outsourcing this complex HR task, you ensure that your company stays compliant.
No Fiduciary Responsibility
When a company offers a retirement plan, they owe a fiduciary duty to their employees. Employers can face lawsuits and fines if they fail to make proper deductions and contributions to their employees' retirement accounts.
When you partner with a PEO, you shed that liability. The PEO manages and administers the retirement plans you select and customize, so they take on all the responsibility for ensuring smooth and correct transactions.
Less Administrative Burden
Administering retirement plans are complex and time-consuming tasks. Even the most experienced HR professionals require a great deal of time and focus to completely administer a retirement plan.
With a PEO, they handle the administrative burden. Not only does this take the complex task off your shoulders, it frees up your internal HR team's time to focus on your core business needs.
Your PEO will handle:
- Annual discrimination audit testing
- Loan deduction and review
- Safe harbor contribution reconciliation
- 5500 filing
PEO Retirement Plans Make Things Easy
Offering retirement plan options as part of your company's comprehensive benefits package just makes sense. It can directly cause more loyal employees, reducing your turnover and making your company a great place to work.
Partnering with the right PEO makes offering a retirement plan easy. By shouldering the burden of administration, compliance, and taking on the fiduciary responsibilities, your PEO can make offering a retirement plan a breeze.