Retirement security is becoming harder for an increasing number of Americans. With less than 50% of Illinois small businesses offering 401(k) programs, employees can’t save enough to live comfortably in their golden years. Previously considered out of reach, this valued benefit is becoming more accessible even for small businesses. With low administration fees, fiduciary shift and tax incentives, partnering with a professional employer organization (PEO) eliminates historical barriers for companies wanting to offer retirement plans.
Realistic fee structure
When large financial institutions were the main player, administration fees for 401(k) programs were prohibitively expensive for small businesses. Their products and services were geared towards large companies where they could make more profit. With a smaller pool of potential participants at small and medium-sized businesses, they charged high fees to make it worthwhile. By outsourcing HR to a PEO, companies can benefit from the purchasing power that comes with being part of a large pool of PEO clients. That means low or no set-up fees and annual administration costs for retirement plans. Those savings get passed on to participants whose accounts won’t get depleted by fees. Plus, the tedious administrative and legal work required when starting a 401(k) is handled by the PEO, making it a turnkey solution.
Stay focused on company growth
There are also recurring responsibilities when administering a 401(k) program. For companies without HR expertise, these duties are time-consuming. Working with a PEO, they act as the fiduciary for their client. A fiduciary acts solely in the interest of the participants and handles:
- Paying deductions
- Tracking contribution limits
- Approving loan and hardship requests
- Processing distributions upon termination
With an expert managing the plan administration, leadership can rest easy knowing they’re taking care of their employees and focusing on the future.
Every tax break helps
With the tight job market, retirement plans are an important strategic tool for recruiting talent. It’s a highly valued benefit and there are three potential tax benefits that employers can claim:
- Credit for Small Employer Pension Plan Startup Costs – up to $500 a year for the first three years of the plan. This can help defray necessary costs to set up and administer the plan and educate employees.
- Administrative fees may be considered a tax-deductible business expense
- Voluntary employer contributions are tax deductible on the employer’s federal income tax.
Employee demand for this benefit continues to grow and companies can now respond. Previously considered an impossible option, small businesses are reevaluating 401(k) plans. As a leading CPEO in Chicago (certified professional employer organization), MidwestHR waives the standard set-up and yearly administration fees for our 401(k) plan. We handle the majority of the administrative tasks and fiduciary responsibilities. Our retirement specialists provide ongoing employee guidance and support. Our clients are proud to help their employees prepare for a secure retirement with minimal expense and time. Give us a call at 630-836-3000 to learn more.