Employee Details Required for 401k

My friend runs a non profit organization and he recently set up a 401k plan for his company quickly and easily. I own a designer clothes shop in Harlingten. Can I set up my 401k the same way? What details about my employees will I need to collect to establish the account?- Misty Young, Texas.

Misty, setting up a 401k for your small business is pretty much the same as doing it for a non profit organization. Today, the entire process is very easy and it can actually be completed within a few hours at the most. You can sign up with a 401k provider like Vanguard or Fidelity to set up your plan. Most small businesses, however, prefer to use a DIY plan like http://lifecycle401k.com. These plans can be set up quickly right from the comfort of your home or office. You can manage the plan and carry out monthly updations in minutes and keep track of the plan easily too.

You also save a lot of money with such DIY plans because there is minimal administration cost. Your employees can keep tabs on their 401k account status easily with such plans too which makes it easy for them to switch investments or keep track of loans they have taken. Look for DIY suites that come with a demo so that you can try out the package before you actually sign up for it. Check if it is user friendly and if it has all the investment choices you want to include for your employees.

To set up the plan you will need to enter some information about your employees and also your company. For example, details of compensation drawn by them, their designation, the date of hiring and similar data will be required. You can decide if you want to make matching contributions and if so, how much, when you set up the plan.

Remember that you can always make contributions without specifying so in the plan document. Or, you can change your plan document later on to include employer contributions. If your business is just starting up then you may want to avoid committing yourself to a specific amount of employer contribution right away and simply add the provision later on.

Catch up Contributions

Tell me more about Catch up Contributions with 401k plans. Who can make them and why is it important to know about these contributions?- Wallace M. Linn, Wichita, KS 67202

Catch up contributions allow employees to make up for a late start in saving for their retirement. If an employee is nearing his retirement age and has very little set aside to live on once he crosses this age, it is very important for him to maximize the savings he can put aside right away. Catch up contributions actually give him a second shot at making retired life financially secure. That is why it is important for your employees, especially those who are older, to know about these contributions.

The IRS regulations say that employees who have crossed the age of 50 can make catch up contributions to their 401k account. In effect, these employees can make their regular contributions and also add in an extra bit to make up for lost years. Different kinds of 401ks allow different catch up contributions which is why it makes things much easier for you, the employer, to sign up for a DIY 401 suite like http://401k-easy.com/. These packages are constantly updated with the most recent IRS limitations and rules. You can always be sure of staying within the law when you administer the plan using this software. Remember that during times of inflation, the IRS usually allows bigger catch up contributions and vice versa so the rules are prone to fairly frequent changes.

If you do intend for your older employees to be able to save more for their retired life, make sure that you add the provision for catch up contributions to your plan right at the outset. Although the law does not make it mandatory for you to include this provision, adding it to your plan is a good way to keep your employees happy. Do remember that without this provision in your plan document, you cannot allow catch up contributions to the plan.

Avoiding Middlemen in your 401k Plan

Is there any way in which I can interact directly with mutual fund companies when I or my employees want to invest 401k funds in these investment products? I would like to avoid paying charges to any third parties and keep my 401k plan affordable.- James J. Silver, runs a interior decoration business in Madison, WI 53703.

Yes, you can set up a 401k plan that lets you interact directly with mutual fund companies when you want to add these investment products to your plan. There are a number of run- it- yourself 401k plans on the internet that let you do this. By choosing a tried and tested plan like the one offered by http://401k-easy.com/, you can make plan administration easy and quick and also avoid paying charges and fees to middle men.

Administration of these DIY 401k plans is quite easy once you take a look at the demo offered by the provider. You can actually set up the plan and have it ready to go without having to hire outside help. Once your plan is up and running, it takes just about 15 minutes for you to update records each month. Make sure that you choose a DIY 401k plan that you can customize to your specific needs. This will let you choose the investments that your employees and you are most likely to use. It will also give you the greatest flexibility in terms of making changes at a future date if the need arises.

The best part about such DIY software suites is that they are very cost effective when compared with the plans that large providers establish and administer for you. You can literally save thousands of dollars every year with these easy to use plans because there is no administration fees involved when you manage the plan on your own. Try out a free download of the software suite before you sign up to ensure that you can follow the instructions and manage the plan easily.