401(k) Plan Implementation
A 401(k) plan is an employer-sponsored retirement savings plan that allows employees to contribute a portion of their salary, often pre-tax, into a designated retirement account. The money is invested and can grow tax-free or with deferred taxes, depending on the type of 401(k) plan. Employers may also offer matching contributions, further boosting retirement savings.
Employers offer 401(k) plans for a variety of reasons, including to: attract and retain talented employees, help their workforce save for retirement, and potential tax advantages.
There are 4 initial steps in setting up a 401(k) plan:
(1) Adopt a written plan document
(2) Arrange a trust for the plan’s assets
(3) Develop a recordkeeping system
(4) Provide plan information to eligible employees
Depending on the characteristics of your company and what your business is trying to achieve with a 401(k) plan, a company could (1) set the 401(k) up themselves; (2) utilize a all-in-one platform; or (3) employ a traditional plan provider.
Authorities For Further Research(i) United States Code, 26 USC § 401(k)
(ii) Code of Federal Regulations, 26 CFR § 1.401(k)-1
(iii) IRS Publications 560, 3998, 4118, 4222, 4224, 4674
