When we talk to prospective clients about our PEO’s retirement plans, they’re sometimes skeptical about the value of using them, especially if they already have their own plans in place. They wonder: Is switching to a PEO’s retirement plan worth it?
My answer is always, “Absolutely.”
It is almost always better for your employees and your business to join a PEO’s retirement plan instead of keeping your existing retirement plan. Keep reading to find out why—and view our short checklist on how to evaluate PEO retirement plan options.
4 Good Reasons To Consider A PEO Retirement Plan For Your Small Business
When comparing retirement plans—the one your small business currently uses and a 401(k) retirement plan offered by a PEO—you’ll immediately see the difference. Using a PEO plan benefits you because:
1. It gives you access to funds with a much lower expense ratio.
Small businesses have access to fewer plan types and fewer options—all at a significantly higher cost than what a PEO plan offers. Small business owners also need to learn about the associated rules and regulations and manage the plan accordingly on a day-to-day basis.
Compare that to this: When you sign on with GenesisHR, you automatically have access to our retirement multiple employer plan (MEP)—a master plan for 401(k) that rolls up under the Federal ID number of the PEO. Each of our clients can adopt the MEP plan and select their own vesting requirements, match amounts, eligibility rules, etc., as long as it’s within the plan scope we offer.
2. Fiduciary exposure is transitioned to the PEO.
When you partner with a PEO, the co-employment relationship is designed to transfer fiduciary exposure from your business to the PEO. That means you and your PEO partner share the responsibility for following all necessary steps and precautions required by law. Instead of you having to keep up with all regulations, due dates, changes in legislation, etc., your PEO will do this for you.
3. The PEO manages the retirement plan for you, giving you time back to focus on your business goals.
By using a PEO retirement plan, you hand over management and oversight of the plan to the PEO—everything from employee onboarding to end of employment or retirement. This includes managing eligibility, employee education, electronic enrollment, managing payroll deferrals, processing loans, and overseeing plan compliance.
4. PEOs are required to have additional oversight for their retirement plans.
Regulations require greater oversight of PEO-managed plans vs. those of small businesses; that includes the annual audit. While it may sound scary to hear the word “audit,” this is actually a huge benefit of having a PEO-sponsored 401(k)—there is a significant amount of fiduciary exposure at stake, and the PEO takes care of that for you. Giving you peace of mind that the plan is both in compliance and provides a valued benefit to the eligible employees.
A Checklist: What To Look For In A PEO Retirement Plan
▢ The actual expenses of the retirement plan; asset fees, participant fees, loan fees, etc.
▢ Regular 401(k) investment committee meetings
▢ A solid fund lineup (not made up of at-risk funds with high expense ratios)
▢ Strong customer service and education resources
▢ ESAC accredited for additional financial oversight
When you choose the GenesisHR PEO retirement plan, here’s what you can expect:
1. A Low PEO Expense Ratio
Some PEOs have annuity-based plans that are not cost-effective; in contrast, GenesisHR offers options that are low-cost and high-quality. And unlike some other companies that have hidden fee components, we provide full transparency when it comes to your expenses.
In some cases, we’ve been able to show clients who don’t use our retirement plan that they’re paying more than they think. When we compare the exact same fund from their own plan with the very same plan within GenesisHR, the GenesisHR option costs significantly less!
2. Fiduciary Oversight
GenesisHR is a certified PEO that is ESAC accredited. This additional third-party financial oversight of our organization requires us to be financially healthy, as proven by required audits. ESAC accreditation provides valuable peace of mind when you’re trusting a company for your 401(k) or any fiduciary.
3. A Safe Harbor 401(k) Option
GenesisHR clients with highly compensated employees have the option for a Safe Harbor 401(k). Traditional 401(k) plans often limit the amount of money business owners, company officers, and high wage earners (often referred to as highly compensated employees or HCEs) can contribute to the plan, because they may contribute too much in comparison to non-highly compensated employees (or non-HCEs).
If you can afford to contribute to your employees’ 401(k)s, this is where implementing a Safe Harbor 401(k) is a sensible way to go. Safe Harbor plans require either a 3% non-elective contribution (when employees receive a 3% company contribution into the 401(k) plan regardless of their participation) or a 4% match (which requires employees to contribute to the plan in order to receive the company match). But when you choose them, all testing requirements of traditional 401(k) plans do not apply.
Safe Harbor 401(k) plans allow you to safely maximize your own contributions to the plan without the worry of over-contributing. Along with that comes the added benefit of investing in the retirement future of your valuable employees. This is such an important topic that we’ve dedicated an entire article to Safe Harbor plans. You can check out our reasoning here: Safe harbor 401(k) vs. traditional 401(k): What’s the difference?
4. Superior Plan Administration
GenesisHR removes the burden of retirement plan administration from your plate. We handle everything related to your employee retirement plan management, from new hire sign-ups (done electronically through our technology platform) to monthly changes, until it’s time for an employee to retire. Additionally, if an employee who wasn’t fully vested leaves your company, we handle the forfeitures.
5. Access To A Leading Retirement Plan
We partner with Slavic 401(k), the largest provider of 401(k) plans in the PEO space, to ensure your company has access to a robust 401(k) plan that rivals the retirement offerings at large companies attempting to poach your talent. You can learn more about Slavic 401(k), and the company’s relationship with PEOs like GenesisHR, here.
6. Second-to-none Customer Service
If you peek around our website, you’ll see numerous references to our superior customer service—and not just from us but from our clients, too! Customer service is a cornerstone in everything we do for our customers.
In addition to connecting you with the necessary service partners for your retirement plan, you will always have the entire GenesisHR team to fall back on if and when you need us. We’re here to help you navigate everything related to your company’s retirement plan.
Still uncertain about whether to switch?
If you’ve read through this article and still aren’t sure you want to switch from your company’s existing retirement plan, that’s okay—you can benefit from our other HR services in a number of ways! It’s up to you whether you want to keep your plan or not.
But if you’re still on the fence about your retirement plan, we’d love to meet with you to discuss your options and answer any questions you have. Get in touch with us today. We’ll have a conversation about what you’re currently doing, and share with you more about the peace of mind and better retirement product offerings you can expect with GenesisHR.