Chapter 1...
Getting Started: to the Plan Administrator
What's Involved in Running a 401k Plan
What's Included in Your Run-It-Yourself 401k Package
What's in This Onscreen Help Guide (and What's Not)
The State of Your 401k Software When You Receive It
Transferring License Diskette Information Into Your 401k Software
Congratulations! Your company has decided to offer its employees a 401k plan. With their relatively high annual contribution limits, 401ks have in the past 20 years become the most popular of all the IRS-sanctioned tax-deferred savings plans. This fact, along with their borrowing capabilities and ease of participation, is why they're second only to health insurance in employee benefit rankings. Until now, employees at your company have been left to lesser alternatives, such as individual retirement accounts (IRAs), but now your company has chosen to offer them the benefit enjoyed by millions. (By Internal Revenue Code definition, 401k plans must be sponsored by an employer and operated through its payroll system).
Not only has your company chosen to sponsor a 401k plan for its employees, but it's chosen a top-quality run-it-yourself 401k plan. That means it can offer exactly the plan it wants: Given that we don't charge you anything extra for a plan full of options, and that your company does the administrative work in-house using state-of-the-art software, how complex or how simple a plan your company offers is its own hands.
Your plan administration software package comes with everything needed to run your company plan, including...
• An IRS-approved prototype 401k plan, customized to your company's needs.
• Plan administration software customized to your exact plan.
• Access via your customized plan administration software to the 401k investments you've chosen for your company plan.
• Free technical support.
• 401k plan enrollment, participation, and employee education forms and materials, all conveniently housed within your plan administration software.
• If ordered (there is an extra charge), payroll interface software to allow your 401k plan administration software to communicate with your payroll software.
• An educational enrollment slide presentation (in convenient DVD format) to help explain 401k plans and their savings potential to your employees.
• Free access to 401k FedForms (http://www.401kfedforms.com) to help you in your 401k-related federal reporting. 401k FedForms tells you which forms you need to complete for your particular plan and where within your 401k software to find the requested information. The website is updated regularly with pertinent IRS changes.
• A Quick Guide, which explains what you have to do and how to use your plan administration software system to do all the basics, and this supplemental Help Guide, which provides additional detail and background.
Which brings us to you. You're the person your company has entrusted with running the company plan. Even if you're unfamiliar with what a 401k is and how one works, you should be able to handle this job well: you've got your plan administration software to help you! We've designed the software and its companion materials to streamline your tasks and make your job simple and straightforward, and we'll be available to help you until your plan is successfully launched and operating!
What's Involved in Running a 401k Plan
There are four major steps in administrating a successful 401k plan:
• You need to acquire a basic understanding of your plan: its fundamental provisions and any options your company has chosen to include, plus any policies the company has set regarding those options (such as its 401k loan policy).
• You need to actively recruit participants for your plan and interact with them in educating them about the plan and serving their needs within it.
• You need to set up and maintain a 401k account for each participant and process all activity associated with that account.
• You need to keep the IRS apprised of the status of and activity in the 401k plan.
Steps 1 and 2 require time away from the computer: time reading through the companion materials, time interacting with company employees. The bulk of this time will come in getting the plan off the ground. After the initial enrollment deluge, these setup tasks will slacken greatly and become dominated by Steps 3 and 4, to which your plan administration software is chiefly geared.
We'll start with getting a basic understanding of 401k plans and your company plan in particular. But first let's take a quick look at what your plan administration software consists of, what this Management Guide covers, and the conventions we use in our explanations.
What's Included in Your Run-It-Yourself 401k Package
Your initial plan administration software package consists of the following:
• A CD-ROM containing the software necessary for accomplishing the tasks you will need to do to administrate the plan. Also incorporated into your plan administration software is the complete series of reports, forms, and documents that you will need to explain the plan to your employees and gather the necessary information from them, keep accurate and detailed records, and communicate properly with the investment company. (You will already have received a hard copy of your Summary Plan Description and Adoption Agreement.) As necessary, the forms and documents are customized to your company and your plan. Some of them are PDF documents, which you can read using the Adobe Acrobat reader.
• A license diskette which does the actual conforming of the CD-ROM to your company plan (including the specifics of your plan as outlined in the Summary Plan Description).
• An enrollment slide presentation packaged in convenient DVD format to help you explain and sell the plan to your employees. You can show this presentation at group enrollment meetings or to individuals thinking about joining the plan.
• The Quick Guide and this supplemental Help Guide.
Please note: Our 401k FedForms guide, which contains copies of the federal tax forms needed for reporting 401k plan information to the Internal Revenue Service (IRS) and/or the Department of Labor (DOL), is now online for our run-it-yourself 401k clients. Go to www.401kfedforms.com.
The Annual 401k Software Updates
Each year, you will receive an updated system CD-ROM from us. This CD-ROM will reflect any IRS, DOL, or other U.S. Government changes that affect your 401k plan. It will also reflect the new year's limits on allowable contributions. Any changes to federal reporting requirements, including samples of the current year's applicable IRS Forms and Schedules, are implemented regularly and posted to our 401k FedForms website. Go to www.401kfedforms.com.
Once the plan is launched, if your company desires to make a change to it, you simply contact our office and we will update your documents, investment portfolio lineup, etc. We will also upgrade your plan to accommodate more eligible employees than your current grouping allows - for example, moving from a maximum of 125 employees to a maximum of 150. There is a charge for these services.
What's in This Onscreen Help Guide (and What's Not)
The purpose of this Guide is to explain the details of using your plan administration software (the software and companion materials) in administrating a 401k plan. It is not intended as a definitive guide to planning and operating a 401k plan. Reasonable discretion and logic should be applied to the lists of tasks and responsibilities that we've devised as organizational tools (Table 2-3 in Chapter 2 and Table 4-1 in Chapter 4), with precedence always being given first and foremost to due dates and other requirements issued by the IRS or any agency with jurisdiction over 401k plans and contributions.
That said, we wrote this Management Guide to make your life running the 401k as simple and straightforward as possible. Running a 401k means paying attention to details; luckily, your plan administration software takes care of most of the interweaving of those details for you! To help you make sure you provide the program with the fundamental information it needs and to make sure you meet all the IRS deadlines, we've concentrated on your duties as Plan Administrator and explained exactly how to use your plan administration software to get them done - quickly and accurately.
We assume in our discussions that you already know how to use your PC; if you don't or are unfamiliar with basic concepts like opening and closing windows or the difference between a file and a folder, please look to your computer and system software guides for help with computer fundamentals.
The Guide consists of chapters that treat the various functions and tasks that you, the Plan Administrator, must accomplish. In general, the first part of each chapter discusses the what and why of the function/task and lists the plan administration software documents and forms associated with that chapter. The second part of the chapter then takes you step-by-step through what you enter into your plan administration software and what the program does with the information.
• Each plan administration software window has a name, which appears in the upper left of the window. When talking about windows, we'll put the name of the window in quotation marks. For instance, the window that appears every time you launch your plan administration software is the "Welcome" window.
• Buttons on which you click your mouse within any plan administration software window are identified with first-letter-caps and typed exactly as they appear on screen.
The State of Your Software When You Receive It
The CD-ROM and the license diskette contain all the information you will need to set up your 401k plan. When you receive your plan administration software package, your CD-ROM contains "demonstration" data for all the plan-specific information that your license diskette contains. In addition, the CD-ROM has sample employee and sample participant information, plus a tour that leads you through the various plan administration software tasks and procedures. Thus you can take as much time as you wish to become familiar with your plan administration software before you conform it to your specific plan through use of the license diskette.
1. Insert the CD-ROM into the drive.
2. If you have the plan administration software demonstration system on your computer, delete it. Then install the CD-ROM contents.
3. Click "My Computer" icon, typically found in the upper left-hand corner of the desktop.
4. Double-click the CD-ROM icon.
5. Double-click the "setup.EXE" icon.
6. Installation will begin.
7. The plan administration software icon will be found on your desktop screen; simply click Start and move the mouse pointer up to then double-click on the software name to run the program.
You then have three choices:
1. Commence with the on-screen tour using the demonstration data,
2. Work with the demonstration data on your own without the tour, or
3. Insert the license diskette and replace the demonstration data with the actual data for your company.
Tip…
It is better to become thoroughly comfortable with the software using the demonstration data before replacing the
demonstration data with the actual data for your company.
Important…
We strongly recommend that you do not change the default installation directory that your plan administration
software will install into. It currently installs into the directory "C:\Program Files\(software name)." Because all
future upgrades will be programmed to install into this location, you should not move the software to a different
directory or location within the "C" directory.
Transferring License Diskette Information into Your Plan Administration Software System
When you feel comfortably familiar with your plan administration software, you can conform it to your specific plan by clicking on License (Plan Administration Software) in the initial "Trial Software" window. An "Update Software License" window will appear. After you have inserted the license diskette, click on Update, and your system will be customized to your plan. The license agreement will again appear; if you agree to the terms and conditions (which should be a formality), click on the Agreement button and the plan administration software main menu will open.
