6 steps to set up a 401(k)

A 401(k) is a workplace retirement plan, and Paychex says a small business can usually get one running in 30 to 60 days. (paychex.com) Paychex updated its guide on April 6, 2026 and laid out six steps: research providers, choose a plan type, draft the plan document, set up a trust for assets, tell employees how the plan works, and keep the plan compliant after launch. (paychex.com) The company’s checklist starts with plan design choices that change costs and paperwork. Paychex points owners to traditional, safe harbor, SIMPLE 401(k), pooled employer plan, and solo 401(k) options depending on headcount and goals. (paychex.com; irs.gov) A 401(k) lets workers defer part of their wages into an individual account through payroll, and the Internal Revenue Service says those elective deferrals generally are not subject to federal income tax withholding when contributed. Employers can also add matching or other contributions, subject to plan rules. (irs.gov) The tax pitch is a big part of the sales case to owners. Paychex says small employers may qualify for credits of up to $16,500 under the Setting Every Community Up for Retirement Enhancement Act and Setting Every Community Up for Retirement Enhancement 2.0, while the Internal Revenue Service says eligible employers can claim up to $5,000 a year for three years for startup costs. (paychex.com; irs.gov) The rules also got tighter for new plans. Paychex says the Setting Every Community Up for Retirement Enhancement 2.0 law requires automatic enrollment for newly established 401(k) plans at companies with more than 10 employees, and retirement-law guidance says that mandate applies beginning with 2025 plan years for plans established after December 29, 2022, with exemptions for some small and new businesses. (paychex.com; mercer.com) The setup is only the start. The Internal Revenue Service says traditional 401(k) plans must meet qualification rules, and plans that are not exempt must run annual nondiscrimination tests to show they do not favor highly compensated employees. (irs.gov) The Department of Labor and the Internal Revenue Service also require annual reporting on Form 5500 for covered plans. The agencies say the filing is a core compliance document, and the Internal Revenue Service says it is generally due on the last day of the seventh month after the plan year ends. (dol.gov; irs.gov) That leaves advisers and payroll providers selling more than an employee perk. The current pitch is a package of recruiting, owner tax benefits, payroll integration, and a compliance process that starts with six steps and continues every year after the plan opens. (paychex.com; irs.gov)