Small Business 401(k): Download Ubiquity's Guide to 401(k) Plans

Discover the transformative power of a 401(k) with our Guide to 401(k) Plans. Learn about the flexible features of a 401(k), tailored to accommodate the diverse needs of small businesses like yours. Empower your business's future and cultivate a loyal, financially secure team.

401(k) types
Plan provision options such as Roth 401(k) and Safe Harbor
Benefits to small business owners
Benefits to employees

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All the essential 401(k) plan details for small businesses in one simple download.

What is a small business 401(k)?

A 401(k) is a retirement savings program tailored for businesses, allowing owners and their employees to contribute portions of their salaries to individual, often tax-deductible accounts. Here’s why it’s a choice option:

Tax Benefits: Contributions are typically tax-deductible, providing immediate fiscal advantages
Employer Match: Business owners can opt to match employee contributions, boosting the retirement fund’s growth
Flexibility: 401(k) plans can be customized to fit specific financial objectives, making them versatile retirement planning tools

Legislation from December 2022 further simplifies the process for business owners to initiate these retirement plans. Pairing this with Ubiquity’s cost-effective, flat-fee plan ensures maximum benefits for both employers and employees.

Advantages of a 401(k) plan

A 401(k) plan serves as more than a financial tool; it’s a testament to commitment and foresight, fostering a sense of belonging and value among employees. By providing a 401(k) plan, businesses demonstrate that they not only invest in their present but deeply care about their team’s futures. Here are the standout benefits:

Immediate Tax Deductions: Both business owners and employees can immediately benefit from tax deductions on their contributions, enhancing current financial freedom.
Tax-Deferred Growth: Investments within a 401(k) enjoy growth without immediate taxation, amplifying potential gains.
Potential Tax Credits: Qualifying for additional credits can further alleviate the tax burden, driving the impact of your savings even further.
Lowered Taxable Income for Employees: By contributing pre-tax dollars, employees can immediately lower their taxable income, yielding direct financial benefits.

Opting for a 401(k) plan is a transformative decision. It not only fosters a culture of appreciation and trust but also ensures the team feels valued and seen. It’s a way to blend business acumen with genuine care, cementing the bond between employers and their workforce. Secure a brighter tomorrow while nurturing a stronger, more united team today.

Your new 401(k) plan could be free with tax credits

There has never been a better time to open a 401(k) for your small business. See if you qualify for up to $16,500 with our calculator.

Take advantage of federal tax credits of up to $16,500 that cover the first three years of your small business 401(k) plan with auto-enrollment¹. These credits remove financial barriers and increase confidence and peace of mind for small business owners. Plus, you can qualify for even more tax credits by contributing to your employees' retirement plan!

Do you already have a 401(k) plan that was started before 2019?

Yes No

May not be eligible for start-up credit if plan is more than 3 years old, but may still be eligible for $500 auto-enrollment credit.

How many employees do you have?

Cannot exceed 100 employees to be eligible for credit.

How many non-owner employees were paid less than $150,000 last year?

Please enter a number less than your total employee count.

IRS guidelines require your plan to have at least one plan participant who was a non-highly compensated employee for it to qualify for the credit.

Ubiquity 401(k) Plan

Would you like to learn more about matching tax credits?

Yes No

Calculate

1. Please refer to Important Information for details

When you offer a 401(k) to your employees, you empower them to build a stable future. It's a practical step that brings both financial security and confidence. And tax credits make the first three years cost-free for you.

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Year 2

Year 3

Total

Ubiquity price before credits

Ubiquity price after credits²

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Thousands in Additional Tax Credits Available

Year 1

Year 2

Year 3

Year 4

Year 5

Total

Available $ Per Eligible Employee as a Government Match Credit

Eligible Employees Receiving Employer Matching

Federal Government Matching Tax Credit to Employer

Out of Pocket Employer Contribition Expense (after tax credits)

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If you’re willing to put into your plan as employer contributions, the federal government will give you full credit on those contributions¹
After tax credits, the cost for you to get up to into your plan over five years is zero
These contributions can be profit sharing, match, safe harbor and QNEC contributions
If employees leaves beforehand, these profit-sharing matching contributions stay in the plan for owner and/or others

Get started! Call toll free 866.845.5058 today or schedule a call later.

This calculator is for illustration purposes only and should not be construed as tax advice. Users should consult a tax professional regarding specific tax needs, credit availability and amount. For further information please visit the IRS website.

Back to Calculator

1. Please refer to Important Information for details.

2. Start-up tax credit modification: Small employers with 50 or fewer employees may apply 100% of qualified start-up costs toward the tax credit formula (up to $5,000 per year). New tax credit for start-up plans offering employer contributions: A tax credit equal to the applicable percentage of employer contributions, capped at a maximum of $1,000 per employee.

Applicable to small employers with 50 or fewer employees. For employees with 51–100 employees: The credit is phased out by reducing the amount of credit each year 2% for each employee in excess of 50. Applicable Percentage: 1st and 2nd year = 100%, 3rd year = 75%, 4th year = 50%, 5th year = 25%, 6th year = 0%

No contributions may be counted for employees with wages in excess of $100,000 (inflation adjusted). If taking advantage of this tax credit, employer contributions may not also be counted toward “start-up costs” in the start-up tax credit calculation.

Plan Provision Choices

Roth 401(k)

A 401(k) plan for small businesses offers dual paths for both employers and employees to invest: traditional pre-tax contributions and Roth 401(k) contributions. While pre-tax contributions allow for immediate tax benefits, Roth 401(k) contributions are made with after-tax dollars, offering future tax-free distributions. These distributions include both the initial contributions and any investment earnings, provided the employee meets specific requirements. To reap these tax-free benefits, the Roth 401(k) account must be held for at least 5 years, and the individual must be 59½ or older, disabled, or deceased. The Roth 401(k) serves as a powerful tool for those concerned about potential future tax changes, safeguarding against an unpredictable tax landscape and offering a reliable pathway to financial security.

Safe Harbor 401(k)

A 401(k) plan has to meet certain rules each year to make sure it’s fair for everyone, not just the top earners. If a plan doesn’t pass these fairness checks, a small business owner can switch to a Safe Harbor 401(k) plan.

A Safe Harbor 401(k) avoids these checks by requiring the employer to make specific contributions that belong to the employee right away. By choosing this option, owners and higher-paid employees can put more money into their 401(k) without being held back by what lower-paid employees contribute. It’s a flexible option that helps everyone make the most of their retirement savings.

New Comparability 401(k)

Unlike standard profit-sharing methods, the New Comparability Plan lets business owners contribute more to certain groups, such as older or higher-earning employees, while still meeting the non-discrimination rules. This plan design is often used by small business owners to maximize their contributions while providing a valuable retirement benefit to employees. It offers a flexible way to allocate contributions and can be a significant advantage for retirement planning.

Read more about New Comparability 401(k) plans

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“Ubiquity's customer service has been spectacular, and their ability to work with my team to educate them on the importance of retirement savings surpasses any other provider I've used. The team is amazing and their pricing and products are better than all the other providers I compared them against.”

- Jason Manuel, Razor Rank

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401(k) Plan Details You Need to Know

401(k) rollover

When individuals stop working for the business sponsoring the 401(k), they typically have four options regarding their 401(k) savings. They can choose to leave their savings in that 401(k), roll over (move) their money to another 401(k), roll over their money to an IRA, or take a cash distribution of their savings. If an individual dissolves their 401(k) and takes the cash, it’s counted as income that year and taxed because the contributions were not taxed when deposited into the 401(k). You will be taxed for the contribution and all the interest earned unless your 401(k) was set up as a Roth, or after-tax plan. Many individuals choose to roll their 401(k) money directly into an IRA or into a 401(k) offered by their new employer. Expert advice: Look at the investment choices available to you and the fees associated with the plan or IRA before making any moves.

401(k) withdrawal

In saving for retirement, tax laws are designed to discourage savers from taking money out of a 401(k) before they retire. Money can only be taken out of a 401(k) after certain events occur such as leaving employment, disability, and retirement. Many 401(k) plans allow individuals to take a withdrawal before retirement if they are experiencing a financial hardship. Distributions took before an individual reaches retirement age may be subject to early distribution taxes as well as income taxes.

Required minimum distributions

If someone reaches age 73 and still has money in their 401(k), they must begin taking a minimum payment each year until the account is depleted. Some 401(k) plans provide exceptions for older workers who are still employed. When the 401(k) participant dies, the person(s) they named as beneficiary generally must continue taking payments out of the 401(k).

Employer 401(k) contributions

Many employers make additional contributions to their employees’ 401(k) plan accounts to help their employees reach their retirement planning goals faster, while also taking advantage of additional tax benefits for their business. The most common employer contribution is a match on a portion of the dollars an employee puts into the plan – for example, an employer may choose to contribute $1 for each dollar the employee contributes, up to the first 3% of the employees’ pre-tax pay. Employers, including self-employed individuals, also sometimes make discretionary profit-sharing contributions to their employees.

Maximum 401(k) contributions

For 2023, you can save up to $22,500 of your pay in a 401(k) ($30,000 if you’re age 50 or older). In addition, the business may make matching or profit-sharing contributions. Employee contributions, combined with any employer contributions, cannot be greater than the employee’s income for the year, up to a maximum of $66,000 for 2023.

Limits for high-earning individuals

Tax laws require 401(k) plans to pass nondiscrimination tests each year to make certain the 401(k) is not primarily benefiting high-earning individuals within the company. The IRS wants to ensure that plans that are being established within an organization are fair and balanced, hence the name, nondiscrimination testing. If lower-paid individuals are not making significant contributions, high-earners and business owners may not be able to maximize their contributions.

Discover Ubiquity's Guide to 401(k) Plans

Delve into a resource crafted with clarity and empathy. It’s not about overwhelming you with complexity, but empowering you with knowledge. Embrace the guide to chart a future filled with possibilities and ensure that every step taken is a confident stride towards a brighter and more fulfilling tomorrow.

Unlock the secrets of pre-tax contributions, personalized investment strategies, and the impactful gesture of matching your employees’ contributions. Elevate your understanding, fortify your decisions, and nurture a shared vision of growth and prosperity. Dive in today.

Get Ubiquity's Guide to 401(k) Plans

Download our Guide and learn how a 401(k) can help lower your taxable income at a low fee and help you and your employees achieve greater financial security.