A Starter 401(k) is a simplified employer-sponsored retirement plan with lower saving limits than a standard 401(k). These plans help employers offer a retirement benefit by streamlining two of the most significant barriers when it comes to offering retirement savings plans: cost and ease of administration.

In general, businesses that already provide a 401(k) can’t open a Starter 401(k). But there are some exceptions:

• If a company previously offered a 401(k) but they terminated it and have not offered a plan in at least 12 months, they may be eligible for a Starter 401(k).
• Businesses that previously had an IRA through a mandated state-sponsored retirement program can choose to establish a Starter 401(k) to replace it. Please note that if the assets from the state-sponsored retirement are in Roth IRAs, they cannot be rolled over to a 401(k) plan.

To enroll in Starter at Guideline, you must be using one of the eligible payroll providers.

To learn more about how Starter compares to other 401(k) plan types, review our comparison chart here.

Yes, Starter is a qualified employer retirement benefit plan and your company may qualify for up to $16,500 in tax credits for the first 3 years.

Guideline’s Starter plan is a Starter 401(k), which is a new kind of employer-sponsored retirement savings account announced with the SECURE Act 2.0 at the end of 2022. Lower savings limits and no employer contributions make these plans easier to administer by exempting them from compliance tests typically in place to ensure a plan does not unfairly favor owners and highly-compensated employees.

Yes, Guideline Starter plans can be upgraded to either Core or Enterprise. Due to the nature of the plan differences, your company’s new standard 401(k) would go into effect at the beginning of the next calendar year.

Yes. Unlike the state-sponsored programs which are typically an IRA, because Starter is a 401(k), it does not affect your or your team’s ability to contribute to an IRA in the same tax year. If eligible for a deductible contribution, this can almost double the amount of tax-advantaged savings potential.

Yes. Starter checks all the boxes currently required by state-run programs and is an affordable solution for employers looking for easy-to-administer retirement benefit.

Yes. Companies who have set up their state-sponsored program are eligible to set up Starter. Note that because the state-sponsored program may be in an IRA, your employees' assets could remain in their accounts unless they choose to roll these over.

While state-sponsored programs can be free for the employer, they can be complex to manage without integrated payroll. Additionally, the cost for employees to invest can be much higher and may limit your team’s ability to contribute to an IRA in the same tax year should they want to.

If your business is already comfortable with lower employee contribution limits and no employer matching, Guideline’s Starter plan is an affordable alternative to state-sponsored programs that can be easier to manage with integrated payroll, potentially offers your team lower cost funds and managed portfolios to choose from, and makes account setup and management easy from the Guideline mobile app.

Yes. If you have more than one legally related entity (sometimes referred to as “legally related groups”), the IRS looks at all your businesses as one employer and therefore, to help keep plans compliant, we require all of your businesses to start a 401(k) at Guideline. Support for legally related groups is available on our Starter and Enterprise tiers. Contact sales to learn more.

We understand that sometimes people need to access their funds before retirement. Starter supports savers with helping to process a hardship withdrawal, which could be subject to tax penalties. In order for your team to be able to take out a 401(k) loan, you will need to have a Core or Enterprise plan.

Starter is a great starting point, but might be too limiting for some businesses. We’ve broken down the differences between Starter, Safe Harbor and Traditional plan designs here.