There is no such thing as a “one size ﬁts all” 401k plan. Why? Employer goals for a 401k plan can vary greatly. Some employers want to maximize owner contributions at the lowest overall cost while others want to incentivize employees to save a portion of their paycheck for retirement. The process of matching 401k specifications to employer goals is called plan design.
There are 6 major features a 401k plan must define during the design process - eligibility, compensation, contributions, vesting, distributions and loans. Each of these features are described below.
Use this checklist
to choose the 401k specifications for your plan based on this information. Once the checklist is complete, a professional 401k provider can use it to help draft a formal plan document to govern your 401k plan.