Setting up a 401k Plan for a Business with Employees

Any tips or advice?

[Jane_Doe]

I need to set up a new 401K plan that covers employees. I'm in the process of collecting information from pension consulting places to create the plan and handle the paperwork.

I found a place that works with one of the big brokerage companies. They had a very pleasant and knowledgeable contact person and the brokerage firm recommends them highly. The problem is they are rather expensive.

My accountant recommended someone from a local company she has worked with for years who would be less expensive, but I'm hesitant to go with a mom and pop firm for something like this.

I was just wondering if anyone else has done this before and if so, how did you find someone to administer the plan? Any tips on what to ask or look out for?

[websatchmo]

I am going through this also. 401K for a small company can be quite expensive. Have you thought about some other options, like a SEP IRA or Simple IRA, or even a small profit sharing plan. May of these plans are much simpler then 401K, and don't require such high management fees.

[Fortune Hunter]

Jane:

When you say you need a plan that covers employees are you referrng to actual employees or yourself as an employee of your own corporation? The reason I ask is because if it is the later I have just finished this process for my own company and it was really easy.

I called my financial planner and he set up a solo 401k plan for me through Oppenheimer that only costs $100 bucks per year in management fees. My "employer" (me) can put in a certain amount of money for my "employee" (me again) and reduce the amount of money I pay in self-employment taxes at the end of the year.

If you are referring to an actual plan to cover your own employees it still shouldn't be that expensive. Any decent financial planner should be able to set one up for you for very little. My financial planner does this for several small companies and the fees are really quite reasonable.

Fortune Hunter

[Jane_Doe]

I need to set up a 401K plan for employees, not a SEP or solo 401K. It costs much more than a solo 401K but you can't use the solo option if you have employees. I also don't want to do the SEP for employees because they have much lower contribution limits than you can have with a 401K.

I think I'm going with a local person as I found someone new who is very sharp who administers a friend's 401K plan. It is a bit more expensive than the online plans from the brokerage places but I think I can customize things more and the extra cost will be worth it.