Everyone knows that the 401k plan is a good thing. A properly administered 401k plan can mean a flexible retirement plan that is satisfies the needs of both employers and workers. As an employer, a 401k plan is typically less expensive than traditional pension plans have historically proven to be, even if the company chooses to match employee contributions. As an employee, the 401k offers considerable flexibility as well as generally higher contribution limits than IRA plans do. But the key to both parties –employer and employee- getting the most out of their plan, is effective 401k Administration. This is where a qualified third party administration company can be a valuable asset.
While 401k plans are beneficial to companies and employees alike, they can be extremely complex to set up and time-consuming to properly administer. 401k Plan Retirement involves considerable effort on the employer’s part: the 401(k) plan documentation, employee enrollment kits and information, preparation of required IRS forms and investment policy statements, among other things. This is after basic choices have been made such as whether adopt a 401(k), 401(a) profit sharing plan or Roth 401(k) plans. Employees have their own IRS forms to be completed and require a plan valuation report, vesting reports, annual statements, ADP and ACP tests and supporting documentation. In short, researching, choosing, installing and administering a 401k plan can be a complex task.
For the self-employed or small businesses, a 401k plan can be even more intimidating. Without the benefit of the Human Resources and Finance departments that large corporations are able to call upon, small business owners can quickly find themselves overwhelmed by the need to adopt a plan for their employees and the demands inherent in effectively administering a plan. Small Business 401k Administration is therefore best left to an experienced third party plan administration company.