Although it is not important to set up a 401k plan if you running a business but the perks of setting one up can not be overlooked. In this article we will tell you How to Set up a 401k Plan for a Small Business?It serves the dual purpose of helping you save the taxable amount and making it easy for the employees to secure their future too which fosters a sense of safety and trust towards the firm in them. You get to choose from some of the best options whether you are a small business with less than 10 employees or one with more than that. But if you are an employee, remember it is virtually impossible to set up a 401k plan with an employer. Further, a 401K plan has a direct consequence of savings of both the employees and the business it must be carefully chosen.
Benefits of 401k for Employers
- Helps to gain the confidence of the employees.
- Aids in saving taxes.
- The employer also gets $500 tax credit for the first three years for the administrative expenses.
- The retirement plan secures the future of both the employees and the employer
Setting up a 401k Plan
The best part about the 401k plan is that despite the benefits that it offers, it is quite easy to set up. Though, if you are doing that for the first time, it may look like rocket science to you. We won’t blame you as it may look like a lot of hassle at first but once you have set up the plan it is easy to maintain. If you want to set one up for your business, you can easily do that in easy steps as given below.
- Create a plan document: Needless to say, before you set up a 401k plan, you must have clarity on why you want to set up a 401K plan and what benefits are you looking for.
- Decide the Contribution limits:Being the employer, you get to decide how much you want to contribute to the 401k plan of the employees. It may even be up to 25%.
- Select a Provider/Recordkeeper:The word record keeper might come as a surprise to you. But it is important to know that the provider here essentially refers to the record keeper who is responsible for making sure that the contribution of each employee is being disbursed each month.
- Payroll:Yes, that’s right as much as everything having an efficient payroll is also essential to maintain the smooth functioning of a 401k plan. The details of the employees from the payroll system have to be uploaded to the recordkeepers end.
- Educating the Employees: Since the aim of setting up a 401k plan is making the business more employee-centric, it can not be achieved without giving completed and transparent information to the employees about the 410k plan.
- Financial Advisor:You might be wondering why does this one come at the end. It is because you can make the decisions about your for 401k plan by yourself but even after it starts functioning, you will need an advisor to safeguard your firm from any lawsuits. Plus he will also be able to help you with some important decisions in respect to the plan like employers and employees contribution and the flexible terms of the plan so added points for that!