Remember those old Roach Motel commercials?<\/p>\n
\u201cRoaches check in\u2026but they don\u2019t check out.\u201d<\/p>\n
For some employers, that\u2019s exactly what it feels like with a PEO.<\/p>\n
Don\u2019t get me wrong. I understand why businesses use Professional Employer Organizations (PEOs). They can simplify payroll, HR, benefits administration, workers\u2019 compensation, and other employment-related functions. For a growing business without a dedicated HR department, a PEO can make a lot of sense.<\/p>\n
The problem isn\u2019t getting into a PEO.<\/p>\n
It\u2019s getting out.<\/p>\n
When an employer decides to switch from one PEO to another\u2014or leave the PEO model altogether\u2014that\u2019s when the retirement plan issues begin.<\/p>\n
Who sponsored the 401(k) plan?<\/p>\n
Who adopted it?<\/p>\n
Do participants need to be spun off into a new plan?<\/p>\n
Is there a plan termination?<\/p>\n
Is there a merger?<\/p>\n
What happens to outstanding participant loans?<\/p>\n
Who files the final Form 5500?<\/p>\n
What happens if the employer has changed EINs during the process?<\/p>\n
I\u2019ve seen situations where everyone assumed someone else was handling these issues. Months later, the employer learns that Form 5500s weren\u2019t filed, participant accounts weren\u2019t transferred properly, or the IRS still thinks they\u2019re sponsoring a plan they thought ended years ago.<\/p>\n
None of these problems are impossible to fix. But they\u2019re much easier\u2014and much less expensive\u2014to address before leaving the PEO than after.<\/p>\n
Too often, employers focus on negotiating the new payroll arrangement while treating the retirement plan as an afterthought. That\u2019s backwards. The retirement plan has its own legal and<\/p>\n
operational requirements under ERISA and the Internal Revenue Code that don\u2019t disappear just because you\u2019re changing HR providers.<\/p>\n
The lesson is simple.<\/p>\n
Before you check out of a PEO, make sure you know exactly how your retirement plan is checking out too.<\/p>\n
Otherwise, like those old Roach Motel commercials, you may discover that leaving isn\u2019t nearly as easy as getting in.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Remember those old Roach Motel commercials? \u201cRoaches check in\u2026but they don\u2019t check out.\u201d For some employers, that\u2019s exactly what it feels like with a PEO. Don\u2019t get me wrong. I understand why businesses use Professional Employer Organizations (PEOs). They can … Continue reading