401Ks

Is it time to unplug from your PEO? Thinking about leaving your PEO’s 401(k)? Learn when to opt out, how to switch, and why a standalone plan may better fit your growing business. Overseeing employee benefits can be a lot to manage—especially with a business to run. That’s why many growing businesses outsource to a Professional Employer Organization (PEO) — streamlined benefits, simplified payroll, and less administrative overhead. But as your business grows, so do your needs—and what once felt like flexibility might now feel more like a constraint. If your benefits options feel limited, costs are hard to decipher, or you’re craving more control over your retirement plan and broader HR strategy, you might be ready to explore other options for your business. Below, we’ll dig into how PEOs work—and why you don’t have to sacrifice flexibility when it comes to your company’s retirement plan. What is a PEO? A PEO is a third-party organization that enters into a co-employment relationship with your business, in which the PEO will: administer payroll and taxes offer benefits like health insurance, 401(k) plans, and more manage HR compliance and risk mitigation For small and medium-sized businesses, this can be a game-changer—helping employers provide benefits without having to build out a full HR team, which takes time and money. How does a PEO 401(k) work? In general, PEOs offer access to a Multiple Employer Plan (MEP) or a Pooled Employer Plan (PEP). These structures group multiple businesses into a single retirement plan. By joining forces, small businesses may be able to access better pricing—and outsource plan administration. However, MEPs and PEPs may involve certain trade-offs—such as a limited investment menu, plan design restrictions, and less transparency into fees—since decisions are made at the pooled level. Employers who oversee their own 401(k) plan retain full control over investment selection, plan features, service providers, and participant support—allowing for a more tailored and strategic approach. If you’d like to learn more MEPs and PEPs, check out our in-depth guide. Can you pick your own 401(k) provider if you’re using a PEO? In short: yes. While PEOs often offer a default retirement plan, you can choose to set up and sponsor your own 401(k)—even if you continue using the PEO for other services like payroll, benefits, and HR support. This is called an “opt-out 401(k)" or a "standalone 401(k)." You’re still using the PEO for everything else, but your retirement plan stands on its own. Keep in mind that as a 401(k) plan sponsor, you would take on additional responsibilities, such as overseeing plan compliance and filing Form 5500. However, many modern 401(k) providers can handle much of the heavy lifting for you. Why businesses choose to go independent Companies often choose to set up their own 401(k) outside of a PEO for a few key reasons: More flexibility. You can design a plan tailored to your employees’ needs, with features like Roth contributions, automatic enrollment, or customized vesting schedules. Greater investment choice. You often have more options—and lower-cost options— when it comes to the fund lineup. Better fee transparency. Standalone plans typically provide clearer visibility into fees and plan costs. Greater employee engagement. Modern providers tend to offer more intuitive, digital experiences, better education tools, and more personalized retirement advice for employees. Ultimately, it’s about choosing a 401(k) that’s truly aligned with your team—and your business goals. Thinking about opting out of your PEO’s 401(k)? If you’re currently with a PEO but wondering if your retirement plan could be doing more for your employees, it may be time to explore a new 401(k) option. The good news: transitioning doesn’t have to be complicated—with the right support. Betterment at Work can help you design a flexible, easy-to-manage 401(k) plan that’s tailored to your business.