If you are going to buy a new printer, I wouldn’t recommend you go talk with your attorney about which printer is best (unless you are worried about your liability). Yes, attorneys use printers probably more than any other professional you know, but are they qualified to tell you which is best for your situation? I think not.
So why do the majority of companies out there allow their payroll provider to manage their 401(k)? I think I know the answer, because it is easier. They already manage your payroll so why not have them setup the 401(k), it so simple. However, as you may know, easier isn’t always better; especially when it comes to ERISA laws.
We come across a lot of companies who use their payroll provider for their 401(k), and that’s okay because having a 401(k) is typically better than not having one, and any issues with it, we can fix them quickly. After going through what we do and what the payroll provider does, most people understand why in this case easier is NOT better.
Below are 5 reasons you shouldn’t use your payroll provider for your 401(k) and a link to a paper written by a super smart ERISA attorney telling you why not to use your payroll provider for your 401(k).
5 REASONS YOU SHOULDN’T USE YOUR PAYROLL PROVIDER FOR YOUR 401(K)
- Not a Fiduciary. Payroll providers typically do not act as a Fiduciary. This means they may mess up, but your are liable not them.
- Cost Ineffective. Payroll providers typically do not have cost effective plans. They may be easier to set up, but are more expensive for the company and participants.
- Not Diversified. Payroll providers typically do not provide diversified enough funds in their plans to allow participants to reach their goals.
- Not Specialized. Payroll providers are good at payroll, this doesn’t mean they are good at picking the right investments, managing those investments, giving advice to trustees, or giving advice to participants.
- No Advice. Payroll providers typically do not give advice to employees to help them manage their plan to meet their goals.
Here is an article written by an ERISA attorney, Ary Rosenbaum, I highly recommend taking the time to read it. In it he discusses the deep dive reasons why you shouldn’t use your payroll provider to manage your 401(k).
If you have any questions or want to speak with one of our advisors about your 401(k) to make sure your plan is set up correctly give us a call or email stephen@millswealthadvisors.com 817-416-7300.