Setting Up Automatic Enrollment 401k Plans

How do I set up an auto enrollment 401k plan for my small business? – Julian McNamara, Auto Parts Dealer, New Jersey

Setting up an auto enrollment 401k plan for your small business is not a complex task at all, unlike what many small business owners think. You can set it up yourself or get a financial institution (bank, mutual fund, insurance company) to do it for you. The advantage of getting an institution to do it for you is that the plan will be maintained on your behalf by them.

If you want to do it yourself, then using a 401k software package is the easiest way to go about setting up your own plan. You will find versatile software at that is not just easy to use, but also very adaptable so that you can continue to use the same software even as your business grows and more employees are added to your rolls.

The first steps to setting up this kind of auto enrollment 401k plan for your small business are as follows:

  • Get the plan document drawn up
  • Set up a trust fund that will take care of the assets that will form part of your 401K
  • Set up the records and record maintenance systems to keep track of contributions and withdrawals from the 401K (check the provisions for this in your 401k software before you start)
  • Once the plan is set up, tell your employees about eligibility criteria, contribution requirements, your matching contributions, withdrawal details etc

Make sure that when you set up your 401K plan for your small business, your employees have enough investment options to choose from. This makes the plan truly attractive for the varying investment temperaments that different employees are bound to have. If you are using a 401k software to manage your plan, then check if it enables investment in various avenues.

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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