401(k) Plans

If you’re trying to learn about 401(k) plans, you may feel overwhelmed by all the information and terms out there. Rest easy; it’s a lot less complicated than it seems. Here are the different types you might have heard about:

Small business 401(k)

A small business 401(k) plan is basically the same as a large business 401(k): a plan that lets you take money from your pay (before paying taxes on it) to save for your retirement. No matter the size of the business, a 401(k) plan has the same benefits and the same maximum contributions. The difference is that retirement plans big businesses get complicated—and expensive.

Big business 401(k) plans are designed for businesses with hundreds or thousands of employees. Because they are more complex, they often require in-person enrollment meetings and special human resources training. Most 401(k) plans for large businesses also have high fees—including assets under management, or AUM fees. AUM fees are charged based on a percentage of the money in your account. That means that the more you save, the higher the fees.

The Ubiquity 401(k) plans detailed below are all small business 401(k) plans. They’re designed for small businesses and individuals who don’t have lots of time and budget to devote to managing a retirement plan. We eliminate all the jargon and offer straightforward, transparent monthly fees—and zero AUM fees—so you can jump in and start saving in minutes while contributing more towards your bottom line.

Individual 401(k), solo 401(k), and self-employed 401(k)

It may sound like an individual 401(k), a solo 401(k), and a self-employed 401(k) are different types of plans, but in reality, all three terms are describing the same thing. An individual, solo, or self-employed 401(k) is a 401(k) plan designed for self-employed people and sole-proprietor businesses. They offer the same savings flexibility and tax advantages of any other 401(k) plan, but in a way that is easy for individuals to manage themselves.

Individual 401(k) plans like the Single(k)^® plan from Ubiquity offers a simple, low-fee plan to help individual business-owners start saving right away.

Self-directed 401(k)

A self-directed 401(k) plan is similar to a traditional 401(k), in that they allow for pre-tax savings and automated paycheck deductions. Where self-directed 401(k) plans differ from some types of traditional 401(k) plans is that employees can choose themselves where to invest their funds. This differs from some traditional employer  plans where the employer chooses the investment options for employees.

401(k) plans for individuals, like Ubiquity’s Single(k)^® plan, are self-directed by default since the employer is the only one contributing to the plan.

SIMPLE 401(k)

A SIMPLE 401(k) plan is, in many ways, a hybrid between traditional 401(k) plans and IRAs. Like with IRAs, employers offering SIMPLE 401(k) plans don’t have to worry about testing their plan for compliance with certain regulatory requirements. Also like IRAs and traditional 401(k) plans, both employers and employees can take loans against their retirement savings, and pay back funds and interest to their own accounts. SIMPLE 401(k) plans do, however, have some disadvantages:

You don’t have the flexibility to customize a SIMPLE 401(k) plan for the unique needs of yourself or your business the way you do with a 401(k). If you have employees in the plan, any contributions that you (the employer) make to your employees’ plans are immediately vested. That means your employees own those funds (and can take them with them to a new job) the moment they are contributed. With a 401(k), employers can set vesting schedules, so that employer contributions are only fully vested after the employee stays with the company for a certain amount of time.

Finally, SIMPLE 401(k) plans have lower contribution limits than traditional 401(k) plans. For 2023, the maximum contribution to a SIMPLE 401(k) plan is $15,500 plus an additional catch-up contribution of $3,500 for people age 50 or older, which provides less savings opportunity than a traditional 401(k), with a 2023 limit of $22,500.

Because of all these disadvantages, Ubiquity does not offer SIMPLE 401(k) plans. We find that most individuals and businesses get more benefit from a traditional 401(k).