Business 401k Plans

As a small business owner or manager providing a 401(k) Plan to employees, there are certain facts that must be disclosed to your employees participating in the plan.  This Summary  Plan Discrption includes documents to keep participants of the 401(k) plan informed of the basic operations of the plan,  as well as disclosing any changes in the 401(k) plan. 

The Summary Description Plan should be in plain language explanation listing the following: 

-  When & how the employees become eligible to participate in the 401(k) plan

-  The contributions to the plan

-  How long it takes to become vested

-  When employees are eligible to receive their benefits

-  How to file a claim for those benefits

-  Basic rights & responsibilities participants have under the federal retirement law

-  Employee Retirement Income Security Act (ERISA)

-  This Summary Plan Description should also include an explanation about the administrative   expenses that will be paid by the plan.

The Summary Plan Description should be given to all participants  or intended participants when they become qualified employees, and again, when they join the 401(k) plan.  It should also be distributed to all participants within a given period of time (generally within 30 days) of any changes in the plan.  the 401(k) Summary Plan Description should also be redistributed periodically during the life of the plan.

So you have determined a 401 (k) Plan is right for your small business.  One of the first requirements is adopting a Written Plan.  This wirtten plan serves as the foundation for the day-to-day operations of the 401(k) plan.  If you have hired an outside entity to manage your 401(k) daily operations, they will, most likely, work with you on adopting the appropriate written document.  It is important for you to keep in mind that, one completed, you and your business are bound by the terms of the 401(k) plan’s written document.   If you are intending to prepare on you own, it would be wise to consult a financial agent experienced in adopting such plans.

As we have disucssed in earlier wirtings, you must first identify what type of 401(k) plan you have decided is best for your small business.   Once you have determined the type, you must include (in your written document)  you will be in a position to outline details such as which employees can contribute, how much they are allowed to contribute,  will you as the employer contribute and at what point.

There are other features written into the plan that are required by law; such as how certain key functions are carried out.  This includes how contributions are deposited in the plan and trustee of the account.  The legal requirements make consulting a professional important.  There are a number of sources for contacting an appropriate consultant.  Do your research and, as I always recommend, consult with a minimum of three consultants prior to retaining the one that best fits your business.