It can be very difficult for small business owners to compete with big companies when it comes to 401(k) plans. Due to their size, large corporations can use economy of scale to their advantage and offer attractive retirement plans that are more affordable due to the size of their employee base.
Small business owners don’t have hundreds of employees to their name, but that doesn’t mean that they can’t have access to economies of scale through other resources.
How a PEO Can Provide New 401(k) Advantages
Small business owners are typically subjected to a lot of costs when they manage their own 401(k) plan, which can scare off some employers. The Pew Charitable Trusts conducted a survey with small- and medium-sized businesses that don’t offer a 401(k) to employees and found that 71 percent of these business claimed that the associated expenses played a role in their decision to forgo a retirement plan.
Without some help, those costs can quickly add up over time. There can be a lot of set-up fees and other miscellaneous charges to maintain plan documents. Most employers are also not experts of retirement planning, so they also need to hire a Third-Party Administrator to handle their 401(k) plan for them.
Small businesses aren’t going to match the output of a big corporation. With a Professional Employer Organization like Group Management Services, they don’t have to. Since GMS represents over 1,000 different companies, we can provide companies with the same types of benefits that the large corporations get due to economy of scale.
Our Multiple Employer Plan creates a level of buying power that a lot of small businesses never get to have. That power can lead to a more diverse investment menu than they might be able to get on a single employer plan, as well as additional perks. We also handle 401(k) Plan administration in house with the aid of Transamerica, which allows us to cut down on the costs that employers would typically pay a Third-Party Administrator.
The Multiple Employer Plan also relieves employers of many of the responsibilities attached to providing substantial fiduciary support for their plan. That includes the following:
- Making sure that contributions get deposited in a timely fashion.
- Selecting and monitoring the investments offered on the plan. We conduct quarterly meetings with our Financial Advisors to do our due diligence on the funds offered on our platform.
- Making sure that plan documents are maintained and keeping our clients compliant.
- Filing one 5500 to the DOL with our clients listed.
- Offering access to a dedicated financial adviser and educational material.
Use Economy of Scale to Your Business’ Advantage
Economy of scale can help your business save big while providing a retirement plan your employees want. Contact us today to talk to one of our experts about our 401(k) plans for small businesses.