How To Set up a 401k Matching Program

Are you looking for a way to keep employee morale and retention high? A 401k matching program can do wonders to attract and retain employees. Studies have found that over half of all employees would participate in a 401k matching program if their employer offered it. Luckily, it is easy to set up a 401k matching program when you follow these steps.

  1. Choose a Structure. If you want to set up a 401k matching program, your first step is to choose what type of structure it will have. There are three basic types of 401k programs. A simple 401k is designed to make employer matching programs simpler for small businesses, in this case those who have fewer than 100 employees. A Safe Harbor plan also is designed for smaller businesses, although it has certain complications such as not allowing a vesting schedule. A traditional 401k plan has fewer restrictions and complications than the former two, allowing employers to set a vesting schedule and make payroll contributions. How you set up a 401k matching program will depend first and foremost on what type you choose.
  2. Choose the Tax Deferral. A normal 401k allows employees to defer taxes on 401k contributions until they collect the money. New laws allow people to choose to make Roth contributions, in which they pay the taxes up front. There are advantages and disadvantages to both types of 401k.
  3. Appoint a Trustee. To set up a 401k matching program, you will need to have a trustee who oversees the plan's investments. They will create the 401k investment plans for your employees. You can use either an outside party with experience in finance or choose a committee from employees of your company.
  4. Inform Employees. The last step you must take to set up a 401k matching program is to inform employees about it. It is best to bring in an investment specialist for this job. Many people are not aware of the benefits of a 401k and employer matching or they have never heard about the tax benefits. An informed group of employees will be more likely to take advantage of your 401k program.

With government retirement plans seeming less permanent every day, it is more important than ever to invest in your retirement. When you set up a 401k matching program, you are not just retaining employees and reaping your own tax benefits; you are helping employees make good decisions for their future.


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