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Greetings, Patti, and welcome. You asked:

My sister owns a women only Health Club which she and I manage together. We have 20 employees most of which have very low incomes.Very few have IRA's. We are unable financially to give them very much of a Christmas bonus (25.00).We would like to do something more than just hand them 25 bucks (which would be gone before they got home)I was wondering if it is possible to set up a 401k for our employees with very little initial money? If not can we help them with the paperwork set up their own IRA's ?

A 401k plan is the employer's plan, not the employee's. It's set up for the benefit of the employees. For a small business with variable profits and not much money, it is an extremely expensive (and hence poor) vehicle for an employer to use.

If you're interested in establishing a formal retirement plan for these employees, then you should get and read IRS Publication 560 (Retirement Plans for Small Business) available for download at For a quick overview of the SEP, SIMPLE and Keogh plans described in that document, read our Foolish Retirement Plan Primer available at

Based on the limited funds available from your description of the business, IMHO your sister could establish a SEP, but is probably far better off just giving the employees the small annual bonus you describe.

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