now that i've been on the other side of that arrangement, I understand why employers offer 401k over IRAs. The underlying reason is that officers are able to set aside larger sums of pre tax or roth money into the company's 401k than any other tax deferred vehicle. When i say larger sums i mean a significant proportion of the company's profits, that might add up to as much as five times or more of what an employee is allowed to put away. In exchange for being able to do that as the owner or officer of the company, the employer is required to offer a retirement matching amount to his employees and this is considered a profit sharing program.

The structure of the retirement matching program is that the company is the custodian of the retirement funds, and most small companies are even medium companies will choose to hire that out to a third party who is responsible for managing and reporting that retirement program. This is why when you start with a new company after the probationary period, when you're allowed to join the retirement program, your asked to talk to the retirement administrator which is always someone at some kind of a financial management firm. It's because of the arrangement where the company is ultimately responsible for your retirement funds that that type of program as only allowed to use managed investments and that's where the entire mutual fund industry comes from, that is to service companies that want to offer 401k's but legally aren't allowed to make any investment recommendations directly to their employees. Reasons being that a corporation good qualify as something called a qualified investor and that means that the corporation if it were managing a retirement fund could theoretically dip into their retirement fund and invest their employees retirement money in two high risk investments particularly this that or not outside of arm's reach relationships. This modern arrangement of retirement options for the average employee is intended to reform the private company pension fund swindles that were happening in the sixties seventies and eighties.