FORTUNE Small Business:

Steps for setting up a 401(k) for your business

Whether you're looking for a solo or group 401(k), here's what the experts recommend as you put together a plan.

Subscribe to Top Stories
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

401k_golden_eggs.03.jpg
Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
Your name:
* Your e-mail address:
* Your city:
* Your state:
* Your daytime phone #:
* Your questions:

(FORTUNE Small Business) -- Dear FSB: How do I start a 401(k) plan for a non-profit organization - and also, how do I do it for a self-employed small business?

- Sammie Lee White, Flint, Mich.

Dear Sammie: Setting up a 401(k) savings plan is relatively easy, and the process is the same for nonprofit organizations and small businesses.

Start by contacting a major financial institution or brokerage that offers 401(k) programs. You may want to ask fellow business owners and colleagues for referrals.

Once you identify an appropriate provider, you will be asked to supply information about your company and its employees, such as their start date, employee status and levels of compensation, says Willard Brumbaugh, an insurance and annuity agent based in Apple Valley, Calif.

The company will prepare several options for you to consider. One critical decision every employer faces is how much money the company can commit to the plan, Brumbaugh says.

For example, some employers may choose to match 50% of every dollar contributed by the employee up to 6% of his earnings. Others may choose not to participate in a matching program at all.

Consider the provider's service quality and past performance. You'll also want them to provide high-quality communications materials that will resonate with your employees, says David Wray, president of the Chicago, Ill.-based nonprofit organization Profit Sharing / 401k Council of America.

Ensure that fees are clearly explained, and that you're paying a reasonable price. Wray advises talking to at least three different providers. Choose the option that most closely matches your company's goals.

You may want to consult a third-party financial advisor or CPA to help you evaluate your options or manage the plan, Wray says.

"Every owner-manager needs to look in the mirror and determine their own comfort level with the decision-making process," Wray says.

For self-employed individuals, a solo 401(k) is also becoming a popular option. The process is the same as outlined above, and starts with contacting a provider, Wray says.  To top of page

Have you set up a 401(k) plan for your company or nonprofit? Tell us about it.

Finally a 401(k) plan just for one

Retirement planning for you and your staff
Photo Galleries
10 big dot-com flops Remember Pets.com? The Nasdaq is roaring back towards its all-time high. Here are some of the biggest dot-com busts from the last time the Nasdaq topped 5,000. More
The hottest gadgets at Mobile World Congress 2015 Take a look at the devices creating a stir at the world's biggest mobile tech show. More
Star Trek technology that we use today With the death of Leonard Nimoy, the actor who played Star Trek's Spock, we remember his character's legacy: The technology we use every day. More
Sponsors