I am the staff accountant at a firearms manufacturer, the owner of the company wants to match up to 4% for 401K - we have a big named payroll company that we rolled over the 401K plan too in August of 2015 and they charge us more than half of the money that is put into the 401K plan for admin fees and I am just wondering if this is the norm?
It is great that the owner of your company wants to match up to 4% of employee contributions in the 401(k) plan. As the other advisor indicated, that will probably allow the owner to contribute more to the plan. Payroll companies are not always the best fit for a 401(k) plan as it is difficult to determine your exact costs and service plan you have with the payroll provider. In order for us to determine if the fees are reasonable we would need more information from you such as types of investment options, services being provided, whether there is an advisor on the plan that is also being compensated, etc. You are welcome to reach out to us directly to discuss your situation in greater detail. Our office number is 415-345-8185.
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The answer requires a bit more information regarding the plan but I would suggest that you look into speaking with other 3rd Party Administrators to see what they can do in order to reduce your costs. Also compare the services that they are providing and how they provide them to you to ascertain their value to you.
You may also want to consider the reasons why you would use a payroll company for a retirement plan vs. companies and advisors who's only job is investment management and plan design and administration vs. a payroll company who's core competency is payroll services.
How many people work for the company? It might be more affordable to do something like a SIMPLE IRA. I'm not sure about other firms, but with us there is only an account fee of $50 per IRA. A 401(k) can sometimes be too expensive sive if only a few people are participating.
Becka - Great question and you are not the only person/company to experience this. As others have said, more information is probably needed to best assess your situation.
Something else to consider, in addition to their admin fees for the 401(k), has this large payroll company used the pricing or even convenience of the payroll, in order to leverage or justify using them as the 401(k) provider? I've run into many plans were plan sponsors want to leave a "payroll provider 401(k)" but hesitate to do so because said provider would increase their payroll fees.
My firm provides 401(k) & retirement plan advice specifically for organizations that are part of the outdoor recreation industry - firearm manufacturers included. I'd be happy to take your call and see if there is anything we can do to help.
Here is my number where I can be reached directly, 763-442-2196 along with my website: northwoods.xyz
I look forward to hearing from you Becka, thanks!