Simple, Affordable 401k Plans Built for Small and Medium-Sized Businesses | ShareBuilder 401k (2024)

FAQs

What are simple 401k plans? ›

SIMPLE 401(k) plans are retirement savings plans offered by small business employers or companies with 100 or fewer employees. This kind of plan combines the features of traditional 401(k)s with the simplicity of SIMPLE IRAs. Participants must be at least 21 and have one year of service before they can participate.

NerdWallet found ShareBuilder 401k to be one of the seven best and most reputable 401(k) providers for small businesses that you should consider in 2022. We've reviewed many Solo 401(k) options based on costs, investment choices, customer service, and other features. Here are the six best Solo 401(k) providers.

Strong benefits can help retain your team. Research indicates that 61% of employees would leave their current employer for a similar job if it offered better retirement benefits. ^ Whether you're recruiting or seeking to keep your current employees, a 401(k) is a terrific incentive.

The solo 401(k) is a retirement savings option for small businesses whose only eligible participants in the plan are the business owners (and their spouses, if they are also employed by the business).

What are the drawbacks of a SIMPLE 401(k)? Mandatory employer contributions. Unlike a traditional 401(k) plan that allows the employer more flexibility when it comes to employer contributions, SIMPLE 401(k) plans require employers to make a mandatory employer contribution every year. Lower contribution limits.

The major types of 401(k) plans are traditional 401(k)s and Roth 401(k)s. Smaller employers may offer you a SIMPLE retirement account, or a safe harbor 401(k) plan.

Lower-risk investment types can help maintain the value of your 401(k), but it is important to consider that lower risk usually means lower returns. Bond funds, money market funds, index funds, stable value funds, and target-date funds are lower-risk options for your 401(k).

The safest place to put your retirement funds is in low-risk investments and savings options with guaranteed growth. Low-risk investments and savings options include fixed annuities, savings accounts, CDs, treasury securities, and money market accounts. Of these, fixed annuities usually provide the best interest rates.

The roll-out to employers is mid-way through. California-based employers with at least 100 employees had to register (or offer an alternative work-based retirement plan) by September 30, 2020, and those with 50+ employees will be required to do so by June 30, 2021.

Solo 401(k) plans are not limited to sole proprietorships. Businesses that are structured as limited liability corporations (LLC), as well as partnerships, may also participate in these plans if they meet all the eligibility requirements.

Why don t small businesses offer 401k? ›

Common reasons small businesses don't offer a 401(k) plan

There are a variety of reasons a small business may not think a 401(k) plan is a viable option for them, but there are three that are the most common: "My company isn't big enough." "I can't afford to sponsor a plan. That's way too expensive."

Many smaller companies opt for SEP IRAs because they are cost-effective and relatively simple to run while still allowing the business owner to help their employees save for retirement. In this plan, business owners can make contributions to IRAs they set up for themselves and their employees.

An Individual 401(k) plan is available to self-employed individuals and business owners, including sole proprietors, owner-only corporations, partnerships, and independent consultants with no employees other than a spouse.

The safe harbor 401(k) plan is not subject to the complex annual nondiscrimination tests that apply to traditional 401(k) plans. Safe harbor 401(k) plans that do not provide any additional contributions in a year are exempted from the top-heavy rules of section 416 of the Internal Revenue Code.

A solo 401(k) is a traditional 401(k) plan, except that it covers only one employee -- the sole proprietor of a business -- and, at most, a spouse. A SIMPLE IRA is short for Savings Incentive Match Plan for Employees, which allows an employer to contribute to multiple employees' traditional IRAs.

The SIMPLE 401(k) plan is a cross between a SIMPLE IRA and a traditional 401(k) plan and offers some features of both plans. For both the SIMPLE IRA and the SIMPLE 401(k), eligible employers must have no more than 100 employees who have received at least $5,000 in compensation from the employer for the previous year.

So you decide to defer 7 percent of your own pay in each paycheck. Over the course of the year, you would save $4,200 in pre-tax or after-tax dollars, while your employer would contribute $1,800, for a total contribution of $6,000.