“Selecting a vendor takes a lot of time and effort,” says Davis, a consultant in Chicago. “Often we see a lot of effort going into that selection process, and then the information is handed out to employees and they’re expected to figure it out on their own.”
The first step is to have a professional from your financial services provider meet with your employees to explain the plan and all of its options.
“We have weekly production meetings where all the guys in the field are together,” says Wadsworth, of Atlanta Design & Build, “so we schedule an IRA expert to come in and talk to the guys. That way they’re hearing it from the expert first-hand. It takes just 15 to 20 minutes and then [employees] can ask any questions they want.”
Atlanta Design & Build offers employees a SEP IRA and a dollar-for-dollar match. Contant agrees that it helps to clearly explain what an employee’s contribution is worth: “If you have someone who shows [employees] on a board that if they make $1,000 a week and they’re putting 3% [in their IRA], that’s $30, but since it’s tax-deductible, it’s really only $20. Then, if the company matches that 3%, it’s actually a $60 contribution. So it might end up costing him only $20 to put $60 in his account.” — David Zuckerman is a freelance writer based in New York.
PEO Specifics If you do hire a PEO, it’s important to remember that the company is economically motivated. A study in the journal Entrepreneurship: Theory and Practice found that PEOs may, for example, take advantage of incomplete contracts that fail to limit fee increases, account for future needs, or explicitly spell out whether the PEO assumes legal liabilities.
It’s also possible that companies with idiosyncratic cultures or processes will find that PEOs don’t meet their needs for customized services; or that if they do, the company might become dependent on customized service, tolerating fee increases or a drop-off in quality to avoid switching vendors.
To ensure the best service, the authors of the study recommend that you work consistently with the same representatives — try to find a PEO that either provides a permanent point of contact or assigns small teams to just a few regional clients. (For more information about PEOs or to find a PEO in your area, visit the National Association of Professional Employer Organizations’ Web site at www.napeo.com.)