Small Business 401(k) Plans

A 401(k) plan is an employer-sponsored retirement arrangement. Employees contribute a defined amount of pre-tax or post-tax dollars each pay period to help save for their retirement. Employers can match all or part of the employee's retirement contributions or provide a profit-sharing contribution.

A 401(k) plan is a type of retirement savings arrangement sponsored by employers. Employees contribute to the 401(k) account from their own pay checks. An employer may match all or part of the employee’s contributions, creating an opportunity for the contributions to grow—many times tax-deferred—until retirement.

Helping employees work towards their retirement goals could provide your business with up to $16,5003 in potential tax credits—possibly more if you offer matching or profit-sharing contributions. Plus, many states—with more to come— mandate that small business owners provide employees with a retirement savings option or face potential penalties. For eligible employees, an employer match can help accelerate retirement savings.

Small businesses with one employee or many can offer 401(k) retirement plans.

Yes. Self-employed individuals are eligible to start a solo 401(k). As part of a solo 401(k), both the self-employed individual and its business can contribute to a plan account.

Yes. Sure401k retirement plans, offered through our partner, ePlan Services, Inc., are available s in 50 states.

Current start-up costs for a 401(k) plan range from $500 to $2,000. However, the SECURE Act 2.0 is changing many aspects of the retirement industry. The legislation makes retirement plans more accessible to a wider range of businesses, specifically offering potential tax credits  to small businesses.

Key differences include eligibility, company size requirements, contribution limits, administrative complexity and contribution levels. Check out the 401(k) plan feature comparison for more information.

Yes. Offering a 401(k) retirement plan can help small businesses  attract and retain talent.

Yes. Any type of business can start a 401(k) plan, including S Corporations, partnerships, sole proprietors, and LLCs.

Yes, the SECURE Act 2.0 has the potential to help small businesses start a retirement plan. Historically, many small business owners have found it difficult to offer employees a retirement plan, often citing complexity, cost, and business size as obstacles.

With the passage of the  2.0, now is a great time to start a 401(k) retirement plan. Thanks to the SECURE Act 2.0, up to 100% of 401(k) start-up costs could be offset by tax credits  for qualifying businesses—a potential savings of up to $16,500 over three years. Plus, eligible businesses can qualify for an additional tax credit of up to $1,000⁴ per employee for employer contributions.

There are several types of retirement plans available to employers, including the traditional 401(k) plan, safe harbor plan, and SIMPLE IRA, and SEP IRA.

There can be  pros and cons to each type of plan. Many businesses tend to use 401(k) plans because they are flexible and enable employees to save more. Even with a 401(k) plan, there are different options, including:

• Traditional 401(k) plans allow employees to save for their retirement through payroll-deducted contributions while also providing employers the option to make contributions to their employees' 401(k) retirement plan accounts. However, due to required annual non-discrimination testing—developed to ensure 401(k) plans do not favor owners or highly compensated employees (HCE) more than other employees—HCEs and business owners may have limits imposed on their annual contribution amounts.
• Safe harbor 401(k) plans provide the same features as a traditional 401(k) plan and are exempt from some annual non-discrimination testing. A safe harbor plan requires minimum annual employer contributions using either a matching formula of at least 4% or a fixed annual contribution of at least 3%.
• Solo(k) gives owner-only and family-only businesses the ability to make the maximum allowable contributions to a small business retirement plan. while providing access to accumulated balances through a loan feature. Business owners and their spouses receive the same advantages of a traditional 401(k) plan, including the ability to make pre-tax and/or Roth contributions, and higher annual contribution limits than allowed in a SEP-IRA or SIMPLE plan.

Yes. To explore our options, contact a member of our team at 866-497-2028.

Small business owners can easily make contributions to their employees' 401(k) accounts with a variety of simple options. As permitted by the IRS, the following plan options may be available:

• Employer matching contributions. If the employer so elects in the plan document, the employer can make uniform matching contributions for employees who contribute elective deferrals (for example, 50 cents for each dollar deferred). Employer matching contributions can be discretionary (contributed in some years and not in others, depending on the employer's approval) or mandatory, as in SIMPLE plans and safe harbor 401(k) plans.
• Employer discretionary or fixed non-elective contributions. Depending on the elections the employer makes in the plan document, the employer either can or must make contributions other than matching contributions for participants. These contributions are made on behalf of all employees who are plan participants, including participants who choose not to contribute elective deferrals. The employer can also determine not to provide discretionary or fixed non-elective contributions.