What Do I Need to Have a Small Business 401(k) Plan?

Small business owners, including start-ups looking to provide their employees with a good retirement plan, sometimes find it difficult to set up a 401(k) plan as they feel they have limited time and resources or cannot afford a plan. However, setting up a simple and budget-friendly 401(k) plan will help you retain existing employees, attract new talent, and automate the plan administration. With the help of 401(k) provider Ubiquity, you’ll have everything you need to set up an effective small business 401(k).

What is a Small Business 401(k)?

Like a 401(k) plan for any large business, a small business 401(k) plan allows you to take out money from your paycheck before tax and save it for your retirement. All employers apart from state and local government bodies can adopt a 401(k) plan. This small business 401(k) is specially designed for individuals and businesses between 1 to 100 employees. By opting for a 401(k) plan, small business owners can take advantage of the tax benefits and offer competitive retirement benefits to their employees.

Benefits of a Small Business 401(k)

Both business owners and employees can enjoy substantial benefits through the small business 401(k) plan. These benefits include:

  • Automatic payment deductions that allow efficient and disciplined savings.
  • Higher contributions when compared to other plans such as SEP or SIMPLE IRA.
  • Tax credit for the administrative expenses associated with the plan start-up costs.
  • Pre-tax salary contributions to the plan that reduces the taxable income.
  • A wide selection of investment options.
  • Opportunity to borrow money from retirement savings.
  • Option to move assets to other retirement arrangements during a job change or retirement.
  • Exclusion from paying the AUM fees or ‘asset under management’ charged by traditional 401(k) plans for larger businesses and is a percentage of the amount present in your account.

How Can You Set Up A Small Business 401(K)?

Each 401(k) provider has different procedures and documentation required to set up the plan. The main steps involved in setting up a plan include:

  • Evaluating and selecting the plan features and services based on your business goals.
  • Adopting a written plan and arranging to fund for the plan.
  • Providing employees with details of the service provider.
  • Notifying the employees about the terms of the plan.
  • Approving loan, hardship requests, and any distribution requests as applicable.

The most important responsibility of a business owner is to promptly ensure that the plan contribution is deposited as per the procedure. If the owner is making matching contributions, these contributions also need to be deposited by the employer before the IRS tax return’s due date to avoid any penalties.

How can a good 401(k) provider help you?

If you are a small business owner, you can seek assistance from a professional 401(k) plan provider who can help you set up a retirement plan and customize it based on your business needs. A knowledgeable 401(k) provider will walk you through the steps to make this as easy as possible. A well-informed professional can help you understand the offers, keep your best interests in mind, and offer transparency so that you can immediately start contributing and saving towards your retirement.


Student. Award-winning communicator. Subtly charming coffeeaholic. Organizer. Gamer. A real dynamo when it comes to managing jack-in-the-boxes for fun and profit. Spent the 80's donating shaving cream in Libya. Spent 2001-2004 lecturing about Roombas in Jacksonville, FL. Garnered an industry award while getting my feet wet with sheep in the government sector. My current pet project is working on Slinkies in Orlando, FL. Spent 2002-2009 developing strategies for crayon art for the underprivileged.