Importance of a Written Plan Document for 401ks

I want to set up a small business 401k for my bakery. I have just 2 employees working for me at present and I have no plans of hiring any more. Do I still need a written plan document for the 401k?- Marilyn G. Yanez, Broomfield, CO 80020

Government regulations require that every tax advantaged 401k plan should have a written plan document. This document communicates necessary information about the plan to your employees. This includes details of how they can participate, the manner in which they can contribute, contribution limits and other important aspects. The document should clearly state all the provisions of the plan. It is up to you to ensure that all your employees are given a copy of the plan document so that they can learn how to participate in your 401k plan. No matter how many employees you have, a plan document is a mandatory requirement for a 401k.

A 401k plan document also tells your employees exactly what benefits they can hope to get when they choose to participate in the plan. Outlining the benefits in this way makes it easy for you to encourage employees to join up. In addition, having the plan’s various features and benefits listed out on paper safeguards you too. Your employees cannot claim to have signed up for the plan under a misunderstanding at a future date.

Formulating a document for your 401k plan is not as difficult as you believe. You can simply adopt an IRS approved master document or choose a prototype plan offered by your provider. If you are using a DIY suite like to set up your 401k plan, then the process is fully automated for you. All you have to do is choose the right options and the software takes care of everything else you need to do to establish the plan and get it running.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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