How to Start a 401(k) Plan for Your Business

Adding a 401(k) plan to your employee benefits package is a meaningful way to support your team’s future while building a stronger, more competitive workplace. If you’re thinking about offering a retirement savings plan for your business, there are a few key steps to help you get started with confidence.

How Your Business Can Start a 401(k) Plan

Setting up a 401(k) plan doesn’t have to be complicated. With the right guidance and a thoughtful approach, you can create a plan that supports both your employees and your long-term business goals.

Learn the Options

There are a few types of 401(k) plans to consider—each with its own structure, rules, and benefits. Here are some of the most common options:

• Traditional 401(k): A flexible plan that allows employees to contribute a portion of their pre-tax income toward retirement. Employers can choose to match contributions, helping employees grow their savings faster. Taxes are deferred until funds are withdrawn in retirement.
• Roth 401(k): With this option, employees contribute after-tax dollars. While contributions won’t reduce taxable income now, withdrawals in retirement—including earnings—can be tax-free if certain requirements are met. This is often a great choice for employees expecting to be in a higher tax bracket later in life.
• Simple 401(k): Designed for small businesses with 100 or fewer employees, this option offers a streamlined approach to retirement savings. Employers are required to make contributions, and all funds are fully vested immediately—making it easy for employees to take full advantage of their benefits.

Write the Plan

Once you’ve decided on the right plan type, the next step is to put the details in writing. This written plan serves as the foundation for how the 401(k) will work, including contribution guidelines, matching policies, and rules for withdrawals. It also ensures the plan stays compliant with IRS regulations. Collaborating with a trusted financial or legal advisor during this process can help ensure everything is set up clearly and correctly.

Form a Trust for 401(k) Assets

To protect employee contributions, 401(k) assets must be held in a dedicated trust. A trustee—often a designated company leader or third-party administrator—is responsible for managing the trust, overseeing investment decisions, and ensuring the funds are used solely for the benefit of plan participants.

Establish Recordkeeping Methods and Procedures

Maintaining accurate records is essential for the long-term success of any retirement plan. This includes tracking contributions, investment performance, earnings, withdrawals, and other account activity. A strong recordkeeping process not only ensures compliance but also gives both employers and employees visibility into the plan’s performance and progress over time.

Contact Our Team

Strong businesses start with strong foundations—and that includes how you manage benefits, payroll, and long-term financial planning. At Machias Savings Bank, we’re committed to helping Maine businesses build financial systems that support growth, stability, and success.

Meet our business banking team to explore how we can help your business move forward with confidence.