Businesses or individuals who are setting up a 401(k) for the first time must write down the details of the 401(k) plan's operation, set up a trust fund for assets, keep accurate records of activity with the plan and provide plan participants with accurate and detailed information both at its inception and throughout their participation in the plan, according to the IRS. It is possible to hire a financial advisor or other financial professional to help set up the 401(k); this person is likely to be able to help with the satisfaction of these four rules, including describing the plan in writing.Continue Reading
Though there are no formal rules governing this step, there are several different types of 401(k), so the unofficial first rule for opening a 401(k) is to select which type of plan to use. As a first step, an individual starting the account should decide between 401(k) types such as a safe harbor, traditional, individual or SIMPLE 401(k), as reported by the IRS and Forbes.
After choosing a plan type, employers who are setting up a 401(k) plan for their employees should announce the plan to the company. This may require an announcement email, which financial institutions may provide, and a meeting for employees to ask questions and learn about the plan.Learn more about Financial Planning