Top 4 Reasons to Outsource Your 401(k) Administration
Plan Sponsors are recognizing potential opportunities for outsourcing 401(k) administration not only because they want to stay on the right side of government agencies such as ERISA and the IRS, but also because they see big benefits, such as: savings for their business; efficient compliance, security, and administrative assistance; minimizing their fiduciary liability as the Plan Sponsor; and utilizing valued expertise from trusted sources.
- Lower Your Cost of Doing Business: With an outsourced 401(k), you’re paying for investment-related services but not spending significant costs in salary, benefits, and maintenance of professional licenses for an in-house expert to run your Retirement Plan. By going in-house, your business is spending more from the full-time employment cost of an Investment Advisor or for a team of Human Resources employees to manage the plan.
- Up-to-Date & Efficient Compliance, Security, & Administrative Assistance: On top of hiring a Plan Manager, your small business would need to expand its IT department to develop a system for managing the funds, include an attorney or paralegal to keep up to date on legal requirements, require your payroll administrator to withdraw the money each pay period, and create a way for employees to access their accounts.
Unless your organization specializes in investment technology, creating and maintaining an online 401(k) system to handle this type of data and payroll in a secure and timely manner is enough of a headache that its not worth the time, effort, or expense.
- Minimize Your Fiduciary Liability: Because your business offers a Retirement Plan, you are going to be held accountable for the decisions made to support your employees’ investment opportunity. However, outsourcing plan management provides additional protection. The amount of additional protection depends on the level of control the outsource provider holds with the plan management.
- You Get Trusted Sources & Valuable Expertise: While you might be an expert in widgets because that’s what your company manufactures and sells, are you ready to be an expert in every area of retirement plan administration? When you select a qualified, informed, and trustworthy financial advisor and 401(k) provider, you’ll benefit from their knowledge and expertise. An outsource provider can help with items that go along with the program, such as: employees who may want to take out loans, distributions, and hardship withdrawals.