Guideline Launches Starter 401(k) Retirement Plan for Small Businesses

Guideline Inc. announced a new plan, Starter, built to support businesses offering a 401(k) for the first time.

Starter builds on the legislation in the SECURE 2.0 Act of 2022, which established a new type of retirement plan, the starter 401(k), designed to have more straightforward compliance and fewer employer requirements. Guideline’s offering is exempt from IRS non-discrimination tests, meaning it has fewer compliance needs. It does, however, contain more limitations, as compared with other startup offerings from Guideline and others, including lower contribution limits and no employer contribution.

“Starter is an easily accessible retirement plan for small businesses,” Jeff Rosenberger, COO at Guideline, wrote in an email. “There is no employer matching allowed or required, and the federal tax credits for starting new 401(k) plans should cover most or all of the administrative costs for the small business. … It is a great way for small businesses to offer a retirement plan to their employees for the first time.”

For employers with 50 or fewer employees, the cost may be free for the first three years after applying up to $16,500 in tax credits.

When it comes to startup plans, Guideline continues to offer “core” and “enterprise” tiers, with several additional features and capabilities, says Rosenberger. However, he believes that for certain small businesses, the “Starter plan will be even more accessible than anything Guideline, or anyone, has been able to offer before as an employer-sponsored plan.”

Starter is available for $39 per month, plus $4 per month for every active participant. The pricing is lower than the company’s core and enterprise tiers and does not require the small business to make an employer contribution, as safe harbor retirement plans do.

“It will also be relatively easy for small businesses to upgrade to our core or enterprise tiers when their business matures to a level where they can make employer contributions and their employees can contribute more,” Rosenberger says.

Starter meets the various mandates for the 14 states that have government-backed IRA programs, such as California and Oregon, notes Rosenberger. He adds that, with Starter, the sponsoring small business pays most of the fees, while also being able to offset those with federal tax credits.

“In contrast, the state programs assess all of their fees on the end savers [participants],” he says. “We also think we can deliver a superior technology product and experience for the small businesses through our payroll integrations with Gusto, Intuit and others, and to their employee participants in the plan through our new mobile app.”