A Guide to Starting a 401(k) for Your Business
A step-by-step approach to establishing a vital benefit for your company.
A step-by-step approach to establishing a vital benefit for your company.
1. Review & Compare 401(k) Types
Deciding which 401(k) type is the best fit for your business hinges on variables such as your number of eligible employees, the amount of employer contributions your business is willing to budget and how much flexibility you prefer. Common types of 401(k)s to compare include the Traditional 401(k), Safe Harbor 401(k) and Individual/Solo 401(k).
2. Determine Plan Details
Some details are dependent on the type of plan you select, but others remain the employer’s choice. To shape the most beneficial plan for your business, consider:
3. Select 401(k) Service Providers
401(k) plans are usually supported by four pillars: the plan sponsor (your business), a fiduciary/trustee (to ensure the plan abides by the regulations governing retirement plans), an investment manager and a recordkeeper/third-party administrator (TPA). As the first pillar, the plan sponsor, you will select and monitor one or more service providers to fulfill the other roles. Your service provider(s) can ease the administrative burden and limit liability, as well as help maintain data accuracy, organize required legal testing, manage investments and provide oversight to help your business stay compliant.
Some financial institutions offer assistance with the selection and organization of service providers, so it’s beneficial to talk to your bank about customized services that would best benefit
your business.
When evaluating 401(k) service providers, review:
4. Launch Your 401(k) Plan
With your service provider, you will arrange:
What are the costs of setting up and managing a 401(k)?
Employers can expect to pay a startup fee, which vary by the service provider, size of the business and complexity of the plan. Businesses also face costs in establishing record-keeping procedures and systems, educational materials for employees and ongoing administration costs from the provider. Smaller businesses, however, may have access to tax credits related to new plans.
Providing a retirement plan such as Company 401(k) is a significant step for your business to align your company values with how you support your employees, attract and retain talent, and build toward a financially secure future for you and those who contribute to your business’ success.
Check out FNB's Retirement Plan Services to learn more.