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401(k) Outsourcing ~ Does it Make Sense?

Outsourcing is the hiring of a consultant from outside the company to complete a task or provide a service that they are better suited to do then your own employees. Many small to mid sized plans are beginning to outsource 401(k) fiduciaries.

Companies outsource many services, including payroll, auditing, marketing, legal defense, building maintenance, HR services and advertising, to name but a few.

The reasons for outsourcing generally include:

  • Cost savings
  • Better outcome
  • Time savings
  • Increased productivity
  • Allows employees to do the things that they do best

Numerous business experts and consultants tout the benefits of outsourcing. Do what you do best and outsource the rest. When work can be done outside better than it can be done inside, you should do it.

There is now a growing trend to outsource 401(k) services for many of the same reasons, but also because there are additional benefits in so doing, such as:

  • Reduced liability
  • Increased objectivity
  • Fewer conflicts of interest
  • Increased service level

Does outsourcing in the 401(k) area make sense?  Consider this!  ERISA’s “prudent expert rule” specifically states that the plan should outsource to independent experts if they themselves do not have the expertise, because it is ultimately in the plan participants’ benefit.



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