The chances of getting a comfortable retirement are not assured. Research by Economic policy institute, states that only half of workers in the country have access to retirement savings.
Well, the research also shows that families approaching retirements have $17,000 savings on average. The saddest part is that half of the small businesses in employees who work in the private sector don’t have any access to a retirement plan. As a small business owner, this is the time to offer a 401k plan to your employees.
Doing this shows your employees that you care about them. And you want to invest in their future. However, starting is not always easy. There are so many options to consider, and most of them are not easy. Further, some offerings are full of complex fees that make it difficult for participants to understand where their money is going or who benefits from the investment.
Here are some tips on how to establish a 401k plan for your employees.
1. Select the Best Plan that Works for Your Business and its Employees
When selecting a plan, consider its applicability to all employees. If possible, it should be accessible to all, including entry-level employees and executive members.
A plan that requires you to make payments to your employees’ accounts are easier to scrutinize. If their design is made correctly, they’ll be exempt from testing. However, the plans that don’t require your contributions will cost less, but are at higher risk of plan failure. Make sure you engage the best 401k providers for small business for this task.
2. Adopt a Written Plan
After adopting the right 401k plan for your employees, draft a formal business plan. The plan should serve as the foundation for the day to operations. Don’t worry if this sounds intimidating. Your 401k plan administrator will handle the paperwork for you.
3. Have a Trust Fund for Your Plan Assets
Any 401k plans should be held in trust. This ensures that they are used solely to benefit the participants and their beneficiaries. In simple words, contributions should be kept safely and monitored by designated survivors. The trustee will be responsible for collecting donations, investing, and issuing distributions to members.
4. Create a Recording System
Maintaining a reliable accounting for the retirement plan is essential to your 401k plan. The recording system helps you to keep track of the contributions, earnings, losses, benefit, and expense distributions from the participant accounts. Well, you can also hire a plan administrator to handle your recordkeeping. Undertaking a good job makes it easier to prepare the plans for annual reports and tax returns.
5. Share the Plan Information with the Participants
As an employer, you are the plan sponsor. Therefore, you’re required to notify all the beneficiaries who are your employees about the 401k plan. In most cases, you’ll accomplish this through a summary plan description which you can circulate regularly. Be sure to detail information about this plan, its benefits, and other documents that relate to these fees.