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Category: Small Business 401k

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.


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.

Every year, the Internal Revenue Service increases employer 401(k) contribution limits to adjust for inflation. It’s important for small business owners and solopreneurs to stay informed of these changes from year to year to remain in compliance and maximize future investments.

How Are 401(k) Employer Contribution Limits Different in 2022?

Employer 401(k) plan contributions face the following rules in 2022:

  • The maximum employee elective deferral increased by $1,000 to $20,500
  • For those age 50 and older, catch up contributions remain the same at $6,500
  • The employee/employer maximum limit increased $3,000 from $58,000 to $61,000 for those under age 50
  • The employee/employer maximum limit increased $3,000 from $64,500 to $67,500 for those age 50 and older
  • The employee compensation limit for calculating contributions increased $15K from $290K to $305K
  • The Key Employee compensation limit for nondiscrimination increased $15K from $185K to $200K
  • The Highly Compensated Employee limit for testing increased $5K from $130K to $135K
  • The maximum SIMPLE 401(k) contribution limit increased $1,000 from $13,500 to $14,500

What’s Notable About Changes to 2022 401(k) Plans?

Typically, the IRS allows a $500 increase in the maximum employee 401(k) deferral and a $1,000 combined employer/employee contribution every one or two years, but higher than normal inflation (5.9%) in recent months has driven these allowances much higher.

The IRS has announced changes to the tax bracket thresholds or standard deductions, and depending on which bracket you fall into, you may want to increase your 401(k) contributions to lower your taxable income for the year.

Other Important Considerations Concerning 401(k) Employer Contribution Limits for 2022

A change in company match limits for 2022 may be of particular concern to you:

  • If you are both employer and employee – you may have the option to contribute to the maximum 2022 limit of $61,000 (or $67,500 if you are age 50+) if you are an entrepreneur, freelancer, or independent contractor with a Solo 401(k)
  • If you are matching employee contributions – you must follow a set formula and also comply with the maximum IRS limits. This year, your matching formulas apply up to $305,000 worth of employee income, which is $15,000 over 2021 – a considerably higher amount

Ubiquity Helps Small Businesses Manage Affordable 401(k) Plans

Ubiquity offers the industry’s most affordable small business 401(k) plans with a low, flat monthly rate that allows your company to grow without worry of increasing administrative costs. When you work with us, you are free to choose your own broker.

We offer everything from traditional and Roth 401k plans to SIMPLE and Safe Harbor 401(k) plans. Contact a 401(k) plan administrator to stay current with the latest employer contribution limit changes year to year and maximize your personal wealth.

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A small business 401(k) is an excellent way to show your team you care about their future.

Not only are 401(k)s ideal for boosting morale and sustaining a committed workforce, but they also offer benefits for your own retirement and tax savings. The time has never been better to start a 401(k), as companies with fewer than 100 employees will receive up to a $5,000 annual tax credit to offset the cost of administrative fees for the first three years.

To start a 401(k) plan for your small business, you’ll need to:

  • Consider which plan you might want.
  • Find the right 401(k) provider that meets your needs and goals.
  • Determine whether you’ll match, create a plan document, and set up an asset trust.
  • Devise a recordkeeping system.
  • Let employees know about their participation options.
  • Maintain your plan.

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Consider which 401(k) plan you might want.

There are several types of 401(k) plans:

Traditional 401(k)s

Many businesses choose the Traditional 401(k) to offer multiple investment options to employees and a way of saving for retirement with tax advantages. Many employers match employee contributions and deduct a portion of employee salaries from their tax obligations for the year. With a traditional plan, no tax is paid on the income put into the account at the time – but rather, tax is paid when money is withdrawn in retirement.

The 2022 limit is $20,500, plus $6,500 additional if you are age 50 or older and want to maximize your savings later in the game.

Roth 401(k)s

Most plans have the option of paying taxes when you put the money into the account rather than when you take it out. This is called a Roth contribution.

Like pre-tax deferrals, Roth 401(k) contributions are made to the plan by employees through payroll deduction. However, Roth contributions are deducted from wages after payroll taxes have been calculated. The investment earnings on Roth contributions grow tax-deferred while held in the plan, just like traditional pre-tax contributions. This money then has the potential to be withdrawn entirely tax-free when the saver hits retirement.

The 2022 limit for all 401(k) contributions is $20,500, plus $6,500 additional if you are 50 or older. This includes both Roth and pre-tax contributions.

Safe Harbor 401(k)s

A Safe Harbor 401(k) is ideal for high earners looking to invest aggressively in a retirement account. Unlike traditional plans, a Safe Harbor does not need to pass deferral and match discrimination tests to prove that it benefits all employees and not just highly compensated executives. Employers can choose to make a non-elective contributions of 3% or a match of up to 6%.

In 2022, business owners with Safe Harbor plans can contribute up to $61,000 plus $6,500 in catch up contributions for owners age 50 or older.

SIMPLE 401(k)s

A SIMPLE 401(k) is a hybrid of an IRA and a 401(k). These accounts allow you to bypass compliance testing and enable employees to take out loans from their accounts, if necessary. Employees are immediately vested and there is less flexibility for employers to customize.

For 2022, the maximum contribution is $14,000 plus $3,000 in catch up contributions for people age 50 or older.

Solo 401(k)s

You can open a 401(k) for yourself (and a spouse or partner), even if you have no other employees as a sole proprietor, freelancer, or startup entrepreneur. You may make contributions as an employer and employee to maximize your tax-advantaged savings.

The contribution limit of $61,000 (plus $6,500 for people age 50 or older) in 2022 is higher than with a SEP IRA.

Find the right 401(k) provider that meets your needs and goals.

Still not sure which plan is right for you? Download our 401(k) guide to find the right 401(k) plan for your small business.

A 401(k) plan provider covers the administrative burden of establishing and running the plan, which can include:

  • Auto-enrollment
  • Employee support
  • Loan administration
  • Trust setup
  • Tax filing

You can expect to pay a monthly charge for this service. Some 401(k) providers work with preferred brokers, while others offer the freedom to choose any broker. Depending on the broker, this financial adviser may choose the investments for the plan or help plan participants choose their own investments.

Determine whether you’ll match, create a plan document, and set up an asset trust.

Next, you’ll need to consider: How much do your employees want to invest in their 401(k)s? How much are you willing to contribute? Keep in mind, any contributions you make can be deducted as a business expense.

The maximum contribution is $61,000 for employees under age 50 and $67,500 for employees age 50 or older. Depending on the type of 401(k) established, certain rules may apply. You may choose to match 50 cents on the dollar, dollar-to-dollar, a percentage of salary, or up to certain limits.

All of this should be clearly spelled out in a legally binding plan document written by the financial institution and professional tasked with handling the plan. This document will also explain employee eligibility or vesting requirements, contribution amounts, and an explanation of how contributions and distributions will be made. A trust will need to be set up to hold the assets.

Devise a recordkeeping system.

You will need a system for tracking employer and employee contributions, earnings and losses, plan investments, expenses, and distributions. Many providers, including Ubiquity on most plan types, handle recordkeeping on your behalf. Otherwise, you may consider payroll software or SaaS payroll services.

Let employees know about their participation options.

Employees can only participate in your generous incentive if they know it exists. A plan provider can give you materials that describe the plan’s benefits, features, and employee rights, which you may then circulate. Employee seminars and presentations can be conducted to maximize participation.

Maintain your plan.

All plans require plan information reporting to employees, payment of plan provider fees, summary reports for plan participants, and completion of Form 5500 for the IRS.

Some plans may require Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) nondiscrimination tests that compare salary deferrals of highly-compensated employees vs. those of non-highly compensated employees.

How many employees do you need to have a 401(k) plan?

To offset the cost of administering a new plan, companies with fewer than 100 employees can receive up to $5,000/year in tax credit over three years (worth $15,000 in total). Plus, you can gain an additional $500 per year in tax credit over three years if you add an auto-enrollment feature to your plan. However, you can start a 401(k) plan even if there are no other employees other than yourself or yourself and your spouse!

It’s a common misconception that only large and mid-sized businesses can afford to offer a 401(k) to their employees in 2022. In the past, 401(k) providers charged small businesses exorbitant fees. Now, you can work with Ubiquity to find small business 401(k)s that are easy and affordable with one flat monthly rate and no assets under management fees – allowing you to grow your 401(k) without paying more.

How much should an employer contribute to the plan?

A common employer match is 50 cents on the dollar up to 6% of an employee’s salary. Another common match formula is dollar-to-dollar up to 3% of an employee’s salary. About one-quarter of small business owners offer no match at all, but may provide profit-sharing contributions on a good year.

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

How many employees do you have?
I am a sole proprietor
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What are the benefits of a 401(k) plan compared to other retirement options?

A 401(k) plan can offer your small business unique benefits when compared to other retirement savings plans. Consider:

Tax-advantaged retirement saving: The biggest advantage of choosing a 401(k) over other retirement options like the SIMPLE IRA, SEP IRA, or profit-sharing plan is the amount of tax-advantaged saving you’re allowed. Saving more creates a bigger retirement nest egg for your future, but also helps you save today. Saving tens of thousands of pre-tax dollars will take your taxable income down a few brackets, meaning you’ll be paying a lesser percentage of your income in taxes every year you contribute.

In 2022, individuals may contribute up to $20,500 to their 401(k) plans. Employers offering matching or non-elective contributions can increase this amount to a maximum of $61,000. Savers who are age 50 or older are also allowed a $6,500 catch-up contribution on top of these limits. Employers are allowed to set their own matching formulas, but they must pass annual non-discrimination tests to ensure fairness for all employees.

By comparison, the 2022 Traditional IRA limit is $6,000 with a $1,000 catch-up contribution allowed for those age 50 or older. You can set aside more with a SIMPLE IRA ($14,000 + $3,000 catch-up) or a SEP IRA ($61,000 + $1,000 catch-up). Here’s the caveat: though the SEP IRA has a high limit, only the employer may contribute to this limit, and whatever percentage of compensation employers wish to contribute to their own plans they must also contribute for each eligible employee.

Employer matching contributions: Matching contributions are a top benefit of 401(k) plans. Typically, employers will match a set percentage of their employees’ contributions. For example, a person earning $50,000 a year, with a 100% match up to 3% 401(k) plan, could expect to receive an extra $1,500 from the employer as long as the individual also contributes as much.

Eligibility: Anyone age 21 or older who meets the employer’s service requirements can save the maximum amount of money in a 401(k), no matter how much they earn. To contribute the full amount to IRAs, account holders must have a modified adjusted gross income worth less than $129,000 (single) or $204,000 (joint). Contributions begin phasing out above those amounts, and you can’t contribute once your income reaches $144,000 (single) or $214,000 (joint).

Investments: Participants in a 401(k) plan are typically limited to the investment options selected by their employers – typically a range of mutual funds – but these are relatively safe bets offering stable returns. IRAs typically allow greater investment choices, including a full suite of stocks, bonds, CDs, mutual funds, ETFs, and more. Yet, without investment knowledge, these options can be riskier.

Contact Ubiquity to find out how to get a 401(k) plan going in as little as 15 minutes.


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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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