The Starter 401(k) allows small employers to offer retirement plans at minimal cost

We talked with Ashley Walker, Senior Director of Retirement Plan Services at CoAdvantage, a leading PEO specializing in HR and benefits solutions for small and mid-sized businesses, about how to help small business owners navigate these changes. 

Q: What does the new Starter 401(k) means for small businesses? 

Ashley Walker: Starter 401(k) plans were created with small businesses in mind. These plans do not allow for employer contributions, have lower employee contribution limits (as compared to traditional 401(k) plans), allow for reduced recordkeeping requirements, thus reducing costs associated with administration, and most importantly, these plans are not subject to compliance testing requirements.

Q: How is SECURE 2.0 expanding retirement accessibility for small employers? 

A: Most small businesses that do not offer a retirement plan usually cannot afford the costs associated with offering such benefit. SECURE 2.0 and the creation of Starter 401(k) plans has allowed small businesses to offer retirement savings for their employees (including owners receiving taxable wages) at minimal cost.  

Q. What are best practices for small business owners considering their first retirement plan? 

A: Small business owners considering offering a retirement plan to their employees should properly review all employer sponsored plans available. If they decide to offer a 401(k), they should review both the pros and cons of a traditional vs. Starter 401(k) to ensure they are providing the best opportunity for both their employees and the business.

Q: What is the impact of these retirement plan benefit changes on employee recruitment and retention? 

A: Offering a Starter 401(k) to your employees shows your employees you are dedicated to their well-being. When offering employment to a candidate, you are providing them with a tax-free retirement savings tool. In addition, you are providing employees with a sense of security and comfort, knowing their employer cares about their future.