An online 401(k) offers many advantages to the typical small business, including payroll integration, lower costs to the plan sponsor and its employees and easier employee onboarding. Your small business, and your employees, may benefit by switching from your traditional 401(k) to an online 401(k) – read about some of the benefits of a technology-driven company retirement plan below.
Benefits of an Online 401(k)
Payroll integration: If your payroll system does not share data with your 401(k) provider, then someone in your company will need to manually manage many important aspects of your 401(k) plan. Introducing tedious, manual work to a business process that is highly regulated by the Department of Labor and IRS can lead to costly mistakes that can be a pain to fix! Check out our summary of the 401(k) Fix-It Guide— the IRS’ somewhat helpful instructions on how to fix incorrect deferral amounts to understand how much work this can be if you get it wrong.
The following are the most common tasks we’ve heard HR professionals handle manually every time they run payroll:
- Uploading files to the 401(k) recordkeeping system
- Calculating new employee eligibility
- Adding new employees to the defined contribution plan – this really becomes an issue if your company is growing quickly or if you have a large number of new employees joining regularly
- Updating 401(k) deferral rates each time employees make a change
- Calculating employee matches, vesting, etc.
ForUsAll’s online 401(k) works with your cloud-based payroll system, meaning your payroll and HR teams no longer need to cope with all of the above manual tasks.
Low fees: The retirement industry is notorious for excessive fees. ForUsAll is proud to be a low-cost provider, and not only offers low cost Vanguard funds but also charges transparent fees for all of our services. A Wall Street Journal article called “New Online 401(k) Plans Disrupt Retirement Market“ highlights ForUsAll as one of the new providers disrupting the retirement industry. From the WSJ:
“Led by technology entrepreneurs and backed by venture capitalists, a crop of startups have launched online 401(k) plans in recent months with the aim of bringing robo-style automated investment services to small businesses, many of which offer their workers high-cost 401(k)s or no retirement savings plans at all.”
Fiduciary coverage: Some online 401(k)s, such as ForUsAll, offer their small businesses fiduciary coverage. The ForUsAll 401(k) provides both a 3(38) and a 3(16) fiduciary to your company’s 401(k) plan – something that is important, considering the fact that without these fiduciary services, you may be the only fiduciary to your employees and the plan. A 401(k) fiduciary is legally responsible for making sure employees have access to a well run defined contribution plan. Large companies typically have HR and benefits professionals to run the 401(k) – but most small business don’t, so this responsibility will likely fall to the owner, CFO or head of HR. Learn more about what it means to be a 401(k) fiduciary here.
Virtual advisor: Much is being made these days of 401(k) robo-advisors (and whether or not your firm needs one). The ForUsAll 401(k) takes employee help a step further. In addition to putting employees in professionally managed portfolios, currently low-cost Vanguard TDFs, we provide a great employee onboarding experience and education. This experience is driven by DAVE, our virtual advisor. DAVE helps get your employees enrolled into the plan, explains their options, and even works well via text messages and in Spanish.
Human advisors: Your employees’ financial wellness matters, and while many online 401(k) providers have found ways to “robo” the investment decisions, your employees may still have a host of financial questions. In addition to our virtual advisor, DAVE, ForUsAll has live, investment advisor representatives available to answer your employees’ financial questions. Should they pay off student debt or invest in your company’s retirement plan, which credit card should they try to pay down, how much should they try to save for a rainy-day fund, and more.
Why Online 401(k) management matters
America faces a $6.8 trillion retirement shortfall. At ForUsAll, we suspect that part of this shortfall is driven by confusion. Traditional 401(k)s are confusing – confusing for small businesses to setup and administer, confusing for employee participants to enroll in and manage, fees are opaque and hard for pretty much everyone to understand, employee education is outdated… it’s the exact opposite of consumer friendly.
Online 401(k)s can help reduce this complexity and consumerize the retirement planning and saving experience. From the benefits listed above to the simple satisfaction of knowing that your business offers a benefit that is at the forefront of technology, choosing an online 401(k) may be the right move for your company. Talk with us now to see if an online 401(k) by ForUsAll makes sense for your small business.