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Author: Siân Killingsworth

The end of the year means a lot of things for small business owners: closing out budgets, getting your year-end orders completed, and benefits enrollment. Whether you’re opening a new 401(k) or sticking with your existing plan, you might be facing IRS testing to make sure your plan treats all employees fairly.

These tests are called nondiscrimination tests, and they are designed to find out if highly compensated employees are able to save money for retirement at a rate that is disproportionately favorable compared to the rate at which rank-and-file employees can save. Small business owners can stay compliant with 401(k) nondiscrimination testing rules by:

  • Understanding what a highly compensated employee is.
  • Encouraging rank-and-file employee participation.
  • Designing a plan with employer contributions that automatically passes IRS testing.
  • Keeping up with annual IRS changes.

If you’re running a small business, working with an experienced retirement plan administrator for your 401(k) planning needs is another great way to set your plan up for success.

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Understand what highly compensated means:

Understanding how employees are defined is an important step toward compliance.

  • A highly compensated employee (HCE) owns more than 5% of the business at any time during the year or preceding year or earned more than $135,000 in 2022 or was designated as the “top paid group” (which often comprises the top 20% in terms of salary)
  • A non-highly compensated employee (NHCE) is anyone who is eligible to participate in the plan who doesn’t meet the criteria
  • Key employees can include HCEs or NHCEs if they own more than 5% of the company, if they are the parent/child/spouse of someone who owns more than 5% of the company, or if they own more than 1% of the company and more than $150,000

If the plan fails nondiscrimination testing, refunds may be due back to the HCEs, or you may need to make contributions to non-HCEs to bring their contribution ratio up. In the worst-case scenario, the whole plan could fail and become disqualified.

Encourage widespread 401(k) plan participation

Financial wellness advising and retirement education training can help boost employee participation rates, though these services can be cost-prohibitive for small business employers.

Establishing a plan with automatic enrollment is one way around this issue, as it provides employers with a three-year tax credit that helps offset the costs of setting up a new plan.

Employees can always opt out, but this strategy has shown to double or even triple the rate of participation, particularly among younger employees and those earning less than $30,000.

Most commonly, auto-enrollment plans deduct at least 3% of an employee’s pay, increasing by 1% a year to a maximum of 10%.

Design a plan that passes

Plan providers often recommend Safe Harbor 401(k)s for small businesses. Though these small business 401(k) retirement plans require employer matching or non-elective contributions, they automatically pass nondiscrimination tests and negate the need for annual plan auditing.

A Safe Harbor matching formula may be:

  • Traditional: Employer matches 100% of salary deferrals on the first 3% of compensation plus 50% of salary deferrals on the next 2% of compensation
  • Enhanced: Employer matches 100% of salary deferrals up to 3-6% of compensation
  • Non-elective: Employer contributes at least 3% of employee pay up to the limit, regardless of what employees themselves contribute

Keep up with annual IRS changes

Every year, the IRS adjusts certain figures in response to inflation and rising salaries. These figures are typically announced at the end of October, so keep your eyes on this space for those updates.

Contact 401(k) plan administrator Ubiquity for more details on setting up a small business retirement savings plan.

The June 30, 2022, CalSavers enrollment deadline has passed. California businesses that have at least five employees and that have not yet enrolled in CalSavers or adopted a custom retirement savings plan now face penalties beginning at $250 per eligible employee if the business remains non-compliant for 90 days after it receives a violation notice from the State.

California small businesses that have missed the deadline can still save on their taxes for this year if they act quickly and choose to either opt in to the CalSavers 401(k) or, alternatively, start their own private 401k retirement plan. In many cases, a customized, low-cost 401(k) savings vehicle may provide more tax benefits, greater savings, and increased employee satisfaction than the state-run CalSavers program.

How will California enforce penalties on small businesses that have missed the CalSavers deadline?

Legal challenges to the CalSavers Law have all been dismissed or denied, which leaves California businesses with the option of enrolling their employees in CalSavers or adopting their own 401(k) plan. Companies that fail to do so will be fined by the CalSavers Retirement Savings Board, which is partnering with the State’s Franchise Tax Board (FTB) to levy penalties on non-compliant businesses.

Why might a small business choose a custom retirement plan over CalSavers?

Although it may seem simpler for a small business to choose the default CalSavers option, doing so may forfeit significant benefits that are available as part of a custom plan.

There are important differences between the state-sponsored plan and a Ubiquity 401(k). A 401(k) solution provides employers with the opportunity to maximize their contributions and tax savings while helping their employees save for the future. With a 401(k) plan you can contribute 3 times more than with an IRA, and there are other important customization options that a 401(k) plan enables.

Consider the following, for example:

  1. A 401(k) allows employees to contribute more than three times the contribution limit of the CalSavers option.
  1. Federal legislation known as the SECURE Act incentivizes small businesses to establish qualified retirement plans by giving them up to $16,500 in tax credits.
  1. Unlike CalSavers, which charges employees an asset-based fee for administering their retirement savings, a private plan can be established on a flat-fee basis, which will give employees greater fee savings.

What other important differences between the state run program and a 401(k)?

There are several critical differences between these plans. Beyond the extra savings any participant can build with a 401(k), employer contributions are allowed as well, meaning small business owners can use this contribution to reward and incentivize employees. This includes an additional employer contribution of up to $40,500 to their own accounts. This chart lays out even more differences between the two types of plan:

Table comparing the CalSavers retirement IRA versus the Ubiquity 401(k) including 3X more savings and up to $16,500 in tax credits for small business owners with a Ubiquity 401(k)

Choose the better plan for your small business and your retirement. Open a Ubiquity 401(k) to satisfy the mandate, save more, lower your taxable income, earn business tax credits, and retain top talent. Call 866.634.6116 or schedule a free consultation with a retirement specialist.

If you’ve held off on providing a 401(k) plan to your employees in the past due to startup expenses, then it’s time to look into the SECURE Act tax credit. As of January 1, 2020, small business 401(k)s are eligible for a tax credit that offsets the cost of plan setup and administration for the first three years.

As a small business 401(k) provider, the experts at Ubiquity will provide all the information you need to offer a new retirement plan at a low, fixed cost.

Step 1: Determine your SECURE Act eligibility.

For SECURE Act 2022 eligibility, you must:

  • Have less than 100 employees who receive $5,000+ per year in compensation.
  • Have at least one plan participant who is a non-highly compensated employee.
  • Not have had a 401(k) or other qualifying retirement plan within the past 3 years.

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Step 2: Set up your small business 401(k) plan.

Next, you’ll need to work with a small business 401(k) plan provider to set up your plan. You’ll need to create a plan document that complies with IRS Code and outlines all the details of your retirement plan. You’ll also need a trust to hold the plan assets and a broker to help you select funds and execute the investments.

Over the years, your 401(k) administrator will help you maintain 401(k) records, enroll new employees, track employee deductions, provide information to plan participants, and keep your plan in compliance with the law.

Ideally, you will choose a low-cost 401(k) provider that focuses on small business clientele and charges a flat fee for service. Administrative costs can vary considerably, with some providers charging per-person fees and assets under management fees — expenses that grow along with the size of your plan. Alternatively, Ubiquity provides flat-fee plans whose cost will never rise, no matter how much your savings grow.

Step 3: Claim your SECURE Act credit.

When you file your taxes, you’ll need to file IRS Form 8881 to claim your startup tax credit. Taking this simple step can qualify you for a tax credit worth $500 to $5,000, put toward up to 50% of your 401(k) setup and administration expenses. If you choose the automatic enrollment feature, you qualify for an additional $500 per year, dollar for dollar.

These credits can be applied for the first three years of your new plan. In total, you can get up to $16,500 in free money for your business just for starting a retirement savings plan, which can help you save more for your own retirement and make your company more competitive in the job market.

Keep in mind that even after the first three years, you’ll be able to write off any non-elective or matching contributions to reduce your company’s taxable income. What’s more, any money put into your own 401(k) will reduce your personal taxable income. The saved money will gain compounding interest over the years, helping you to feel more financially secure in your retirement.

Questions about 401(k) retirement plans for your small business? Contact Ubiquity today.

Safe Harbor 401(k) Tax Credits 

Siân Killingsworth / 5 Aug 2022 / Safe Harbor 401k

Image of a dock and the Ubiquity "U" in a life vest with a lifesaver

The most highly valued benefit of Safe Harbor 401k plans is that small business owners automatically satisfy non discrimination testing allowing them to maximize their deferrals without worry of a failed test. But did you know that choosing to set up a Safe Harbor retirement savings plan also qualifies small businesses for special tax credits to offset administrative costs? It’s true – the Safe Harbor provision can help you bring down your corporate taxes, and the savings can be applied to running the plan itself.

Who Qualifies for Safe Harbor Tax Credits?

As of January 2020, the SECURE Act permits qualified small businesses to claim a tax credit (of up to $5,000 per year for the first three years) for adopting a new 401(k) retirement plan, regardless of the plan’s Safe Harbor status.

To qualify, a small business must have 100 or fewer employees who received at least $5,000 in compensation in the preceding year, had at least one non highly compensated employee,  and you must not have had a 401(k) or qualifying retirement plan within the last three years.

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What Tax Credits Apply to Safe Harbor 401(k) Plans?

There are two types of tax credits that apply to small business 401(k) plans:

The New Plan Tax Credit

The SECURE Act tax credit lets qualified small businesses claim up to $5,000 in tax deductions per year for up to three years. They can save up to a total of $15,000 when they establish a new 401(k) plan.

The Auto-Enrollment Tax Credit

Small business employers can also claim $500 a year (for three years) by adding an auto-enrollment feature to a new or existing plan. When you choose auto-enrollment, all eligible employees will be entered into the plan at a base rate of 3% pay, which automatically increases by 1% each year until reaching a maximum of 15%. Employees can opt out or modify their savings rate at any time without affecting the small business tax credit.

In summary: you can claim a maximum of $5,500/year — or $16,500 in total — over a three-year period.

Additional Benefits of Safe Harbor 401(k) Plans

The tax credit opportunity is just one of the many reasons small businesses consider a Safe Harbor 401(k) plan.

Safe Harbor small business 401(k)s  require employer contributions. You can choose from several contribution formulas: You can contribute in one of two ways:

  • A non-elective contribution worth 3% pay to every eligible employee in the plan.
  • A basic or enhanced matching contribution which is immediately 100% vested.
  • A sample basic match might be 100% on the first 3% and 50% on the next 2%.
  • A sample enhanced match might be a 100% match on the first 4%.

At tax time, you can also write off any amount contributed as a tax-deductible business expense, which may lower your tax bill.

Also, because you will automatically pass the IRS non-discrimination tests, you won’t have the stress or potential penalties from noncompliance as a financial concern.

If you have questions about 401(k) retirement plans for your small business, including how to take advantage of Safe Harbor tax credits, contact Ubiquity — one of America’s top providers of low-cost, flat-fee small business 401(k)s.




A comparison of state-managed IRA plans and a private 401(k) retirement plan.

On July 1, 2019, California’s new CalSavers 401(k) program began to fulfill its mission of offering workers in the state a new way to save for their retirements even if their employers do not offer a retirement plan.

CalSavers effectively addresses a crisis that is looming for a large number of employees by making it easier for them to save for their retirements. In many cases, however, a custom 401(k) plan may be a better alternative for small businesses and their employees’ futures. Compare the advantages of CalSavers to a private 401(K) such as those offered by Ubiquity and determine which choice is right for your company’s needs, culture, and bottom line.

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How Will CalSavers Help to Increase Retirement Savings for California Workers?

Studies from similar legislative incentives in other states show that programs like CalSavers will:

  • reduce employee costs for participating in retirement plans and
  • increase overall participation in those plans by employees of small businesses.

In Oregon, retirement legislation went into effect in 2018. Between its rollout and 2021, total retirement assets held in the state-sponsored program increased from $3.5 million to more than $113 million.

The CalSavers program gives California businesses that have as few as five employees a state-sponsored option for a payroll deduction retirement plan. Employees that participate in the California plan can contribute up to $6,000 per year into a state managed Roth IRA.

Contributions can be directed into a variety of vehicles, all of which are selected by CalSavers administrators:

  • targeted date funds
  • money market certificates
  • bond index funds
  • equity funds
  • balanced funds

This plan is essentially a bare-bones option for employees who want to save for their retirement but whose employers do not offer a separate payroll savings plan for that purpose.

What Are the Alternatives to the State Retirement Program?

As opposed to a state-run IRA, a private 401(k) plan allows for much higher contribution amounts. This means participants can save more each year and increase compound interest as they approach retirement age.

With the state plan, employees are typically maxed out at contributing $6,000/year, while they can save up to $20,500/year with a 401(k). The total potential savings are even greater for employers, who can save up to $61,000 a year with a 401(k). They achieve this by contributing a maximum of $20,500 as an employee and an additional $40,500 as employer. Furthermore, offering a benefits package that includes a 401(k) with a high contribution limit gives companies a way to stay competitive in the hiring market.

Companies that choose the state plan may also be missing out on significant tax benefits from the government. Because of the SECURE Act, small businesses can earn $16,500 in tax credits ($5,500/year for the first three years) by sponsoring a 401(k) for their employees that includes auto-enrollment. These tax credits – which can be used to cover most of the cost of starting your own retirement savings plan – are NOT available to companies that opt-in to CalSavers.

Additionally, the state plan charges asset-based fees, which means that your employees are penalized for saving more – i.e., the more assets they save, the more fees they are charged. By contrast, flat-fee 401(k)s are more transparent and charge the same fee no matter how much your employees’ assets accumulate. This can add up to a big savings in the long run.

For employers and employees who prefer to have some degree of control over how their savings are invested, small business 401(k)s offer customizable investment lineups. No such option is available with the state plan, where the state mandates how savings are invested.



In an effort to ensure that small California businesses are able to help their employees save for retirement, in 2019 the state launched its CalSavers retirement savings program with staggered deadlines for opt-ins by businesses of different sizes. The first deadline, which applied to small businesses with more than 50 employees, expired on June 30, 2021. The next legislated deadline of June 30, 2022, applies to all small California businesses that have five or more employees.

Small businesses in the Golden State need to weigh their options and decide if setting up their own 401(k) retirement savings plan is a better alternative than opting into the state retirement program. To start the conversation, here are four key things that employers should know about the state plan as the June 30 deadline approaches.

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Small Businesses Will Face Large Fines if They Fail to Comply

The state will first serve a notice on a non-compliant employer. If the employer has not established a state plan or another customized plan within 90 days after receiving the notice, it will face fines that begin at $250 for each eligible employee. After 180 days, the fine doubles to $500.


State-Run Plans are Roth IRAs

Like all Roth IRAs, the California state-run plan allows employees to annually contribute up to $6,000 of their after-tax income (or $7,000 if they are over 50 years old). Note that this is significantly less than the maximum amount participants in a private 401(k) plan can contribute. A 401(k) allows employees to save $20,500 and employers, who may contribute as both an employee AND an employer, can put away up to $61,000,

Roth plans also feature tax-preferred treatment for withdrawals that employees take after retirement.


State-Run Plans are Not Your Only Option

If you want to consider an alternative retirement plan for your small business, California allows you to offer traditional 401(k)s and other plans to meet your obligations under the mandate. These plans may feature additional benefits for employees, such as higher contribution limits, more investment choices, and greater tax advantages. 401(k) advantages include:

  • High contribution maximums for employers: Employers can contribute $20,500 as an employee AND another $40,500 as the employer to their own nest eggs, totaling $61,000. That’s significantly better than the $6k a Roth IRA allows.
  • With a 401(k) such as Ubiquity’s, employers may qualify for a $15,000 startup tax credit: Employers can get up to $5,000/year for each of the first three years, which may cover the cost of starting your 401(k) plan.
  • $1,500 automatic enrollment tax credit: employers get an extra $500/year for each of the first three years when you add auto-enrollment.

The Mandate Will Benefit Millions of California Employees

The enactment of this legislation will have an almost immediate beneficial impact on more than 7.5 million California private-sector employees. It will encourage employers to expand employee options for retirement savings with low-cost and easy-to-understand retirement plans. The state anticipates that its plan and alternative 401(k) plans will enhance California’s reputation as a favorable location to start a small business.

To speak with a retirement expert on which plan is right for your small business, reach out to Ubiquity today.


Small business retirement plans offer an ideal way to incentivize worker loyalty, save for your own retirement, and reduce your tax burden for the year. The best way to choose the right retirement plan for your small business is to work with a low-fee 401(k) provider like Ubiquity, who can help you ask the right questions and customize a savings vehicle that meets all of your needs. Plans vary based on contribution amounts, who may contribute (employer or employee), and administration requirements. There are several critical factors to consider when selecting your company’s retirement plan.

Types of Small Business Retirement Plans

Since Social Security only replaces about 40% of one’s working income, most people will need a retirement savings account to help fund their desired lifestyle. Small business retirement planning options include:

  • Defined contribution plans / 401(k)s: Defined contribution plans remain popular among small businesses because they offer high limits and are typically managed by a third-party administrator, which lowers risk for employers and increases flexibility and support for workers.
    • Employers may contribute up to $61,000 to a 401(k) plan in 2022, plus $6,500 in catch up contributions for those age 50 and older. These plans may be vested, in which case employer contributions only become available after a set number of years. Employees cannot contribute to the plan.
    • In 2022, a 401(k) allows employees to save up to $20,500, plus up to $6,500 in catch-up contributions for those age 50 and older. Employers can also make contributions to the plans to a total balance of $61,000 – $67,500. While plans must pass annual nondiscrimination tests, adding a Safe Harbor provision can help alleviate this requirement if the employer agrees to contribute at least 3% of employee salaries to the plan or chooses a matching formula.
  • Individual retirement accounts (IRAs): IRAs are popular among small businesses due to the ease and cost-effectiveness of setup, though some IRAs have higher limits than others.
    • The Payroll Deduction IRA is employee-funded and auto-transfers money from each paycheck into the fund. The maximum contribution in 2022 is $6,000 (+$1,000 for those age 50 and older).
    • The Simplified Employee Pension (SEP) IRA allows employers to contribute a percentage of employee salaries into the account, though it must be the same for each employee. This amount can vary from year to year, depending on company profits. Employers can put up to 25% of employee compensation into the plan up to $61,000 in 2022; however, voluntary employee salary deferrals and catch-up contributions are not allowed.
    • Lastly, the Savings Incentive Match Plan (SIMPLE) IRA allows employer and employee contributions up to $14,000 in 2022, with a $3,000 catch-up allowance for those age 50 and older. If employees contribute, the employer must dollar-for-dollar match on the first 3% of the employees’ salaries. If employees do not contribute, employers must put in 2% of the employees’ salaries up to the maximum limit.
  • Defined benefit plans / pensions: Few employers (about 14%) offer the classic traditional pension plan these days. While you can still find open-ended arrangements in some unionized industries, they are uncommon among small businesses due to the expense.
    • With a cash balance pension, employees can choose to take a lump sum or monthly payments at retirement. For 2022, workers could set aside up to $245,000 a year in a tax-deferred pension fund, though the plan will need to pass nondiscrimination testing that shows fair contributions to all employees. On top of this allowance, employees and employers may also contribute to 401(k)s.

Whichever type of retirement savings plan you choose, you and your employees will have the opportunity to reduce your taxable income for the year as you grow your money tax-deferred.

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Tax Advantages and Other Incentives of Small Business Retirement Plans

Why pay more taxes than you need to? In addition to saving for your future, small business 401(k)s let you reduce your tax burden this year. You’ll pay taxes on the money as it’s withdrawn in retirement, after years of accruing interest and growing your nest egg.

Consider these tax advantages of a 401k for small business owners:

  • Employers and employees can deduct contribution amounts from taxable income for the year.
  • Businesses enjoy a tax credit equal to 50% of new plan startup costs (up to $500) for three years.

And there are advantages for employees as well:

  • Low and moderate-income employees can receive 10-50% (up to $2,000) as a “Saver’s Credit.”
  • A Roth program can be added that lets employees make after-tax contributions and withdraw tax-free.

Small Business Retirement Planning Questions to Consider

When choosing the right plan for your business, ask yourself:

  • Do I need high limits to allow key employees and owners the ability to contribute the maximum?
  • Am I worried about employee turnover and wish to reward loyalty with a vesting schedule?
  • Do I want to lower liability and increase investment choice flexibility?
  • Do I want to offer matching funds to encourage plan participation?
  • Am I comfortable contributing the same amount each year, or do I want it to vary based on profits?


On March 29th, 2022, a proposed expansion of the Setting Every Community Up for Retirement Enhancement Act of 2019 Act passed the House with a 414-5 vote. While the so-called SECURE Act 2.0 must still pass the Senate — which has its own proposals — and receive a signature of approval from President Biden, increases in retirement security may soon come our way.

Here are some of the proposed changes as of Spring 2022:

SECURE Act 2022 Eligibility

Currently, plans have the option to prevent employees that work under 1,000 hours from becoming eligible in a retirement plan. However, most notably, the SECURE Act 2.0 would allow part-time employees who work at least 500 hours of service for two consecutive years to become eligible to defer into the plan. Under the new proposal, the first group of long-term, part-time workers would become eligible for participation as of January 1, 2023.


The House bill would require newly established plans to implement automatic enrollment for all eligible employees at a rate of 3% of pay. Small businesses with 10 or fewer employees and startups with less than three years in business would be exempt from the mandate. The Senate version of the bill encourages, but does not require, auto-enrollment.

Higher Deferral Limits

To promote additional savings, the SECURE Act increases the cap on payroll contributions from 10 to 15 percent of an employee’s check for Safe Harbor small business 401(k)s. Employees can still opt out, but having the ability to escalate savings up to 15 percent can be a significant enticement for mid-career hires who are looking to catch up on retirement security.

Employer Tax Credit

Present law provides for a tax credit for small employers (100 or fewer employees) that adopt a retirement plan. The credit is equal to 50% of plan start-up costs and is capped between $500 and $5,000 depending on the size of the employer. The credit is available for the first 3 years of plan adoption. This provision would modify the existing credit by increasing the 50% rate to 75% in the case of an employer with 25 or fewer employees. The provision would be effective after 2023.

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Student Loan Repayment

An estimated 26% of young workers cannot afford to save for retirement because they’re paying off student loans. Under the proposed rule, students could repay their student loans and still earn their employer’s matching contribution.

Increased Savings for Older Americans

Americans aged 62 to 64 could make catch up contributions of $10,000 — up from $6,500 — with that savings considered Roth contributions, meaning they pay taxes now to enjoy tax-free capital gains at withdrawal time.

Also, required minimum distributions (RMDs) could be put off even longer. The 2019 SECURE Act increased the age of mandatory retirement withdrawal from 70.5 to 72. However, the House-passed bill increases the age of annual withdrawals to 73 in 2023, 74 in 2030, and 75 in 2033. The Senate proposal would raise the RMD to 75 by 2032 and waive RMDs for individuals with less than $100,000 in retirement savings and reduce the penalty for failing to take RMDs from 50 to 25%.


So-called “stretch IRAs” would no longer be allowed under the current bill, meaning that non-spouses inheriting a retirement account would need to take a full payout within 10 years of the account holder’s death, rather than stretching out disbursements over their lifetimes.

Simple, Affordable Retirement Plans for Your Small Business

Contact Ubiquity to see how our low-fee, customizable 401(k) retirement plans for your small business can help you take full advantage of Secure Act provisions. Set up your free consultation today and take the first steps toward meeting your retirement savings goals.

Safe Harbor 401(k)s are a popular choice for small business owners who are looking to reward employees with higher retirement contributions, while also maximizing their own retirement funds. With mandatory employer contributions, Safe Harbor 401(k) plans exempt employers from the hassle of annual IRS auditing and most nondiscrimination testing. Below are our tips on how to get the most out of Safe Harbor retirement plans in 2022.

2022 Safe Harbor 401(k) Quick Facts

  • Employees can contribute up to $20,500 of their annual salary, which reduces their taxable income.
  • The maximum combined employer/employee contribution limit for 2022 is up to $61,000.
  • Employees age 50 and older can put in an extra $6,500 in catch-up contributions on top of the maximum limits.
  • Taxes are due when employees take the money out at retirement as early as 55 years of age.
  • Employers must contribute at least 3% of each employee’s salary or match up to 4% of contributions.
  • All employer contributions are immediately 100% vested.
  • Annual IRS testing is considered satisfied.
  • Employers can claim a $500 additional tax credit for plan startup costs for the first three years of a new 401(k) if the plan has automatic enrollment.

How to Save the Most for Your Retirement As a Small Business Owner

There are several reasons Safe Harbor plans are excellent small business retirement plans, allowing company owners to save more for retirement:

  • No annual nondiscrimination testing: Administrative costs include statement mailing, completing IRS Form 5500, approving loans and distributions, and plan participant support. These costs can range from $750 to $3,000 a year, but tend to be on the higher side if annual nondiscrimination testing is required, too. Unlike most 401(k) administrators, Ubiquity does not charge AUM or per-person fees.
  • No corrective refunds: In a traditional 401(k), the average amount business owners and highly compensated employees contribute to the plan generally cannot exceed 2% higher than the average amount regular employees contribute.

If the 401(k) plan has low enrollment or modest participation, those with the means to fund their retirement would be unable to do so. By agreeing to contribute at least 3% to all staff members, you maximize the freedom to fund your retirement to the limit and generously reward key employees as well.

  • Lower tax burden: Contributions made to your own plan lower your personal taxable income for the year. Contributions made to your employees lower your taxable business income for the year.
  • Higher profitability: According to T. Rowe Price, companies with great 401(k) plans have 20-80% higher profits than companies with poor 401(k)s. The research suggests that well-compensated employees are more satisfied and productive. Lower turnover means lower training costs, which allows you to save more money for retirement and reinvest more into the business.

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What Safe Harbor 401(k) Formulas Are Available?

With a 3% nonelective contribution, employers simply fund each employee’s plan to the tune of 3% of the employee’s annual salary up to the maximum employer/employee limit, regardless of what the employee contributes.

Other options for a Safe Harbor 401(k) employer matching formula include:

  • Basic: A 100% match on the first 3% of employee contributions and 50% match on the next 3-5%.
  • Enhanced: A 100% match on the first 4-6% of employee contributions.

As a small business employer, any of these match formulas will satisfy the Safe Harbor requirements and allow you to contribute up to $61,000 to your own retirement fund, acting as both “employee” and “employer.”

Considering the Transition to a Safe Harbor 401(k)?

Whether you’re starting a brand-new Safe Harbor or converting an existing small business 401(k) by adding an amendment, Ubiquity can help. Our small business focus and flexible plans allow us to serve our clients at a lower cost without AUM or per-enrollee fees, which means your plan can grow without penalty. Contact us for details.

As a financial advisor, you maintain a laser focus on helping your clients build and grow wealth.

Offering your clients an outsourced retirement plan through a trusted 401(k) provider can help you avoid taking on new work and additional risk while maximizing your client’s 401(k) contributions, reducing their tax liability and taking advantage of the SECURE Act business tax credits.

But how can you get busy clients to pay attention to one more thing?

A comprehensive email campaign can be your key to opening those doors. And we don’t mean just one email – below, we’re giving you a series of emails that follow one another with thoughtful questions, valuable answers, and compelling calls to action. This is what gets your clients to take a look. Use these templates and personalize them for your own book of business.

  • Email 1: High-level introduction. Why are you reaching out to them?

Hi [First Name],

I’m pleased to let you know that I am now able to offer retirement plans for small businesses like yours. Now it’s easy to give your employees the retirement plan options they want without the cost, risk, and administrative burden of a traditional 401(k).

Improve employee satisfaction, retention, and recruitment while helping your team save for the future.

I’d love to set up a brief call to share how a 401(k) plan can help your small business. [Insert your contact info here.]


[Your Name]

  • Email 2: Expand on value & differentiate

Hey [First Name]!

In my work as an advisor, I specialize in [list 1–2 differentiators here. Be specific and concise – the goal is no more than two brief sentences.]

However, I am adding a new offering that is specially designed for small businesses like yours: a small business 401(k) plan through Ubiquity Retirement + Savings®. They have helped thousands of small business owners and employees save over $3 billion over the past 20 years.

Did you know that you can use tax credits to fund the program? I’d like to show you how that works. Just click my calendar to schedule some time that’s convenient for you. [link to your calendar].

[Your Name]

  • Email 3: Reminder

Hi [First Name],

I’ll keep this brief. I know your small business could benefit from offering a retirement plan. When you set this up, the tax credits alone may pay for the program.

And as a small business owner, you can put away up to $61,000 for your own retirement this year (or $67,500 if you are age 50 or older).

Want to hear more? Just hit “reply” and let me know.

[Your Name]

  • Email 4: Offer Personalized Support

Hi [First Name],

I’ve partnered with Ubiquity Retirement + Savings® to bring retirement options to small business owners like you.

Ubiquity’s experienced sales team provides one-on-one, personalized coaching. We walk through the process with you, unraveling complexities and delivering advice based on best practices, for a customized, turnkey retirement plan that meets your goals and saves you time.

Are you interested in a brief conversation about your plan? About 20 minutes will do it – just grab some time when it’s convenient for you: [link to your calendar]

[Your Name]

  • Email 5: Final outreach/Meeting request

Hi [First Name], I know you’re busy.

I’d like to show you how you can retain and reward your employees while qualifying for small business tax credits with an affordable retirement plan.

Can we connect for 20 minutes? [link to your calendar]

Best regards,
[Your Name]

Finalize and Scale

Once you have personalized and perfected the emails to your satisfaction, you can start sending them to your clients in batches. Start small, in groups of perhaps 10, so you can get a sense of response volume.

Be mindful of timing. Some periods will naturally be busier than others, such as tax season, so you don’t want to waste an opportunity by reaching out when your clients won’t have time.

If you’d like to learn more about our retirement plans, please visit the Ubiquity website or contact us today at 855.401.4357, Option 4.

There are many reasons that employers would want to offer 401(k) matching contributions to their employees’ retirement funds: It’s not only a great way to reward loyal employees and reduce turnover, but it also helps attract new talent for whom a competitive benefits package is a must. But how do employers know if they qualify to offer a 401(k) match?

The ability to offer a 401(k) company match depends upon:

  • Your plan
  • Employee eligibility
  • Annual IRS limit
  • Employee compensation
  • Vesting schedules

Your Plan

The terms of a 401(k) match may vary considerably. The plan you drew up with the plan administrator will detail the exact formula and stipulations. As the employer, you may change the terms at any time, though you will need to provide notice to all employees within 60 days of making the change.

A typical match is 25%, 50%, or 100% of the employee’s contribution amount, up to a limit of total employee salary. For instance, one common formula is 100% match on the first 2% of contributions, and 50% match on the next 4%.

If your plan includes additional non-elective deferrals or profit shares that are not included in the match formula, you will need to factor these amounts into the overall IRS limit calculation to ensure you do not exceed it.

How much will you pay for 401(k)? Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Employee Eligibility

Employees can be eligible to receive an employer’s 401(k) match if they:

  • Are at least 21 years of age.
  • Have completed at least 1,000 hours of service over the last 12 months.
  • Have worked 500 hours or more hours for three consecutive years.

2022 IRS Limit

Employees are allowed to contribute up to $20,500 toward their 401(k) plans in 2022—with an additional $6,500 allowed for employees aged 50 or older.

Employer matches are provided on top of this amount, but the total combined employer/employee amount cannot exceed $57,000 (up to age 50) or $63,500 (age 50 or older).

Up to 100% of an employee’s salary may be contributed as a 401(k) match bonus—or the IRS limit, whichever comes first.

Employee Compensation Limits

The IRS adjusts the maximum employee compensation limit each year based on the cost of living. For 2022, the limit has increased to $305,000, meaning any amount of compensation above this amount isn’t eligible for contribution.

Employees earning more than the limit can contribute their maximum salary deferral, with the employer’s matching contribution applying up to this limit. So, if you’re earning $400,000 and your employer offers a 5% match on your contributions, your employer match will be limited to $15,250 (5% of $305,000) instead of $20,000 (5% of $400,000).

It’s also important to consider matching contributions for Highly Compensated Employees (HCEs). Any employee who owns over 5% of the business or who makes more than $135,000 in 2022 is considered to be an HCE. In order for the plan to remain ERISA compliant, HCEs cannot contribute more than 2% more of their salary than the average non-HCE.

Vesting Schedules

Some small business 401k plans are drawn up to include immediate vesting, but more commonly, employers create a vesting period ranging from one to six years that uses the money saved by not vesting short-term employees to reward loyal, long-term employees. Individuals who leave the company before the match kicks in do not receive any employer funds. Employees may contribute to their own accounts as they please. However, employer vesting can occur gradually or all at once.

Ubiquity has a long track record of helping employers and employees get the most out of their small business retirement plans. Reach out today to learn how easy it can be to start a low-fee 401(k) with company matching funds.


Read Ubiquity’s 3 Steps to Building Financial Security in an Economic Downturn

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Read the Definitive Guide to Small Business 401(k)
Download Your 401(k) Guide Now

© 2022 Ubiquity Retirement + Savings
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Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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© 2022 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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