Integrating 401(k) Admin with Payroll Just Makes Sense

Offering the right kinds of benefits to employees can mean the difference between maintaining a loyal and dedicated staff and having to constantly deal with turnover. For example, offering employees a 401(k) retirement benefit is a big plus for recruiting and hiring. Equally important is managing that benefit to ensure that employees are well taken care of. For this reason, integrating 401(k) plans into payroll outsourcing just makes sense.

More small and medium-sized businesses than ever before are taking advantage of outsourced payroll services because they save time and money, increase efficiency, and make a company leaner and competitive. Some are also finding that their 401(k) plans can also be more efficiently managed by leaving them to outsourcing partners.

Make no mistake; 401(k) plans are just as legally complex as payroll taxes. Monies have to be deducted from employee wages according to specific rules; it has to be transferred to retirement plans in a timely manner and with accurate record-keeping in place. Knowing what it takes to properly administer a 401(k) plan should make it obvious that allowing the payroll services provider to handle it is a better option than keeping it in-house.

Payroll Vendor in the Best Position

There is a tremendous amount of data administration relating to 401(k) plans for small business. For example, plan providers need an incredible amount of information about individual participants in order to administer their retirement funds correctly. A payroll vendor is in a perfect position to provide that information because they also need it to administer payroll correctly. Simply put, why duplicate the same data and information with both a payroll vendor and the HR department when the vendor has already done the heavy lifting?

The payroll services provider already has the systems and resources in place to provide 401(k) plans. Payroll vendors also have the ability to track employee and employer contributions in real-time. This puts them in a very strong position to make sure everything stays on the up and up.

Compliance and Peace of Mind

Unfortunately, the record keeping involved in 401(k) plans is very complex. And just as with tax reporting and payment, even a minor error in 401(k) record keeping could result in substantial penalties. It is far better for the small or medium-sized business to trust a payroll vendor to handle the record keeping task in order to maintain compliance.

With compliance comes peace of mind. And as any small business owner knows, peace of mind is invaluable in the business world. Knowing that the payroll vendor has the 401(k) plan under control takes a lot of pressure off business owners and managers who certainly do not need more things to worry about.

It is All about Administration

Whether you are talking about payroll taxes or 401(k) plans for small business, it all comes down to administration. It is about keeping the right records, applying the proper deductions to employee wages, and making sure payments are submitted in a timely manner. On the surface, it does not look like much to a business owner who has never had to deal with a 401(k) plan before. But once the door is opened to offering this benefit, the complexities of 401(k) administration suddenly become apparent.

What many small and medium-sized businesses are now discovering is that it makes good sense to offload 401(k) plan administration to the company's current payroll vendor. That vendor is already familiar with the business and already has the systems in place to handle the 401(k) plan with very little additional effort from the client.

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