Avoid Having your Payroll Provider Manage your 401k for These Reasons

Every business owner should look into the many benefits of sponsoring a corporate retirement plan. For the owner, a good plan can help attract and retain quality employees, the employer contributions are tax deductible, and assets in the plan grow tax-deferred. For the employees, their contributions reduce current taxable income, compounding interest over time allows contributions to grow significantly, and they have an opportunity to improve financial security in retirement.

When business owners take their first step in opening a corporate retirement plan, many go with the “convenient” option of using their payroll provider as their Third Party Administrator (TPA). Many payroll companies offer the choice of simply “flipping the switch” and turning on a retirement plan. This element of convenience is what attracts busy owners, but there are several reasons why you should stay away from using your payroll provider for your corporate retirement plan.

Qualified retirement plans are complex, with many important rules and testing you need to adhere by. Payroll providers often do not offer all of the necessary components of properly managing a qualified retirement plan. Instead, payroll providers offer plan templates with fund lineups for business owners to choose from. They are not fiduciaries, meaning they do not provide you with investment advice. They instead fill their fund lineups with hidden fees and get kickbacks from the fund companies.

Payroll providers also do not offer all of the compliance testing measures to ensure that your plan is properly managed, and often charge higher fees for these services as well. An experienced advisor and plan administrator that specializes in corporate retirement plans can provide immense value that your payroll provider cannot. An Advisor and Qualified TPA will help your plan remain in compliance with Department of Labor rules and the Employee Retirement Income Security Act (ERISA). 401k Advisors and Administrators bring their expertise in plan design, comprehensive compliance testing, and investment due diligence to set your company’s customized plan on a path for success.

When it comes to managing your company’s corporate retirement plan, it’s best to avoid picking your payroll provider because they seem to be the easiest and most convenient option. A good Investment Advisory Firm can make the administrative component of plan enrollment just as seamless as the perceived convenience of using your payroll provider.

At Fogel Capital Management, we are not only experienced 401k plan fiduciaries, but we also offer detailed plan proposals that are customized to your business. We provide a detailed review of the tax structure and contribution levels for the employer and employees while also taking the time to educate your employees not only on how the plan works but also how much it increases the odds of a successful retirement. Fogel Capital would like the opportunity to show you as a business owner that you do not have to compromise competence for convenience. Call our office for a FREE Corporate Retirement Plan proposal today!