A Business Owner’s Guide to 401(k) Plan Setup

You’ve done your research and found a 401(k) plan that fits your company’s needs. Now it’s time to set it up. Even after the initial legwork of choosing a plan, the launch phase can be intimidating. However, with the right preparation and support, you can check all the boxes for a compliant retirement plan.

At ePlan Services (ePlan), we’re committed to supporting our clients through 401(k) setup and management. Our simple plan establishment tool gets your plan up and running in as little as one business day. As we look forward to helping you set up your plan, our team has some setup tips to support you from the get-go.

Do your research.

When setting up your plan, empower yourself with information from the start. How does automatic enrollment work in your plan? What are the safe harbor options and how do you set it up for your 401(k) plan? How do you set up your profile as a plan administrator?

This is also a great time to dive into your provider’s self-service tools and knowledge bases. Get answers to your initial questions, and then explore what your provider has to offer.

Decide who will manage the plan.

As a small or medium-sized business, you likely don’t have the same HR resources as large enterprises. So, you’ll need to appoint someone to manage the plan. 401(k) plan administrator responsibilities include tasks like maintaining plan documentation, integrating with payroll, communicating with employees, and filing the annual Form 5500.

By appointing a plan administrator from the start, you can transition smoothly from setup into maintenance.

Establish a 401(k) plan document.

Employers who offer 401(k) plans need to create IRS-compliant plan documents. The documents outline the type of 401(k) that you’re offering (i.e. traditional, safe harbor, etc.), as well as its features (like employee eligibility and other benefits like profit sharing). Plan documents provide detailed guidance for both administrators and plan participants.

ePlan services supports plan administrators in producing these plan documents as part of our hands-on client onboarding process. This takes another 401(k) setup task off of your to-do list.

Ask the ePlan team about our IRS Approved Plan Documents.

Set up a trust.

The IRS requires employers to keep 401(k) assets in a qualified trust. This trust is separate from the company’s funds and holds employee contributions. You will also need to appoint a trustee to manage the trust account and fund contributions. Some companies select an internal trustee, while others outsource. If you have questions about trust setup, reach out to our team.

Take advantage of your welcome call.

After setting up your 401(k) plan using our establishment tool, you’ll receive an email inviting you to set up a welcome call with our team. This is just one of the ways we offer personalized support for our clients. During this call, and ePlan team member will walk you through our online dashboard and discuss plan enrollment.

Don’t hesitate to ask questions during this call. We want to empower you to view your 401(k) insights, update your info, and use our self-service tools.

Keep meticulous records.

Accurate recordkeeping is key for 401(k) management. Your company should have records of plan setup, participant enrollment, plan contributions, and distributions. Be sure to set up this recordkeeping system prior to offering the retirement plan to employees.

Make copies of all your paperwork, as well as digital copies as a backup. Keep security in mind when managing these records, as these materials contain sensitive employee data.

Remember compliance planning.

Reviewing your 401(k) plan for compliance may not be on your mind when you’re setting up your plan, but it should be. All companies that offer 401(k) plans need to file an annual Form 5500 and are subject to compliance testing. You’ll save yourself from stress later by learning about your compliance responsibilities and having a plan in place.

Compliance preparedness is one of the benefits of working with a 401(k) provider that offers compliance support. That’s why ePlan offers convenient online compliance testing, Form 5500 prep and filing, and deadline communication.

Knowing your compliance deadlines from the start eliminates surprises when filing season rolls around.

Keep employees informed.

You might be a new business starting a 401(k) plan for the first time, or you might be switching to a new provider. Either way, it’s best practice to keep your employees informed. As you’re setting up the 401(k) plan, compile all the information and instructions your employees might need.

ePlan will also provide a summary plan description (SPD). This document, which is like the plan document, provides participants with a description of the plan and its benefits.

Remember, your 401(k) provider has online tools and services to help your employees enroll. Point your employees to these tools, so they can save time managing their accounts.

Leverage account data.

Data helps you make decisions, adapt your plan, and provide guidance to your employees. Be sure to take advantage of the online tools your provider offers right from the start. Generate reports and keep an eye on trends. This data can show you information like who’s contributing to their plan or taking out distributions.

Setting up a 401(k) plan requires careful planning. ePlan supports our clients and takes the stress out of account maintenance. With a suite of online tools and resources, we’re proud to be a trusted provider of medium and small business 401(k) plans. Contact us today for a free quote.