Retirement Plans

401(k) Plans for Small Businesses

If you own and operate a small business and think that offering 401(k) pension plans to your employees is a bit out of reach, think again. Not only are 401(k) plans powerful tools in boosting financial security for retirement, but they also are a valuable offering for businesses n this economy. If you offer a well-designed 401(k) plan, below are only some of the benefits.

• It lends your business a reputation of being there through thick and thin for its employees.
• It allows participants to decide on contribution amounts before tax is applied.
• Employers receive a tax deduction when they make matching contributions to their employees’ accounts.
• Employees can see how their efforts translate into profit by reaping the benefits of investment growth in stocks, mutual funds, money market funds, savings accounts and other investment outlets.

Once you have established a 401(k) plan, certain responsibilities in operating the plan have to be assumed by you or someone you hire to manage the plan for you. Depending on whether you hired someone to help you set up the plan, you might want to turn to them to manage it as well. If all of this falls on you, then you might want to hire some help to take care of some or many aspects of operation. The plan will require overseeing participation, contributions, vesting, nondiscrimination, investing of monies, fiduciary responsibilities, disclosing plan information to participants, reporting to government agencies, and distributing benefits.

The following code of conduct is required by courtesy and ERISA. It is a matter of public trust, so the fiduciary’s responsibilities include:

• Acting solely in the interest of the participants and their beneficiaries;
• Acting for the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan.
• Carrying out duties with the care, skill, prudence, and diligence of a prudent person familiar with such matters.
• Following the plan documents;
• Diversifying plan investments.

You should and must notify your employees that their 401(k) plan will be discontinued. Typically, the process of terminating a 401(k) plan includes amending the plan document, distributing all assets, and filing a final Form 5500. Your plan’s financial institution or a retirement plan professional can tell you what you need to do to finalize things with termination of your 401(k).

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