A 401(k) is a simple way to build a retirement savings plan by making contributions with each paycheck. Every pay day, a set amount is automatically deducted from employees’ paychecks and added to their 401(k) accounts. Employees specify the amount — usually a percentage of their gross pay — and the funds they want to invest in.

For employers, offering a 401(k) plan provides an affordable method to help ensure employees are prepared for retirement without the business having to set up and operate a costly pension plan. The employer pays the administrative costs, and has the flexibility to match a percentage of the employees’ contributions.

401(k) accounts started in 1978 when Congress amended the Internal Revenue Code to include Section 401(k) — hence the name. This new system created a retirement savings alternative for businesses struggling to maintain high-cost pension plans, also ensuring employees’ retirement savings were secure if their employers went out of business. The 401(k) system has proved so effective that other countries have made their own "401(k)" plans, even though they have no Section 401(k) in their tax codes.

Sure401k offers the most popular 401(k) options at the most affordable prices.

Traditional 401(k) allows employees to save for their retirement through payroll-deducted contributions, and employers have the option to make additional contributions to their employees’ 401(k) accounts. Due to annual non-discrimination testing — a testing method developed to ensure 401(k) plans do not favor highly compensated employees (HCEs) more than a certain allowable amount — HCEs and small business owners may have limits imposed on their contribution amounts.

Safe Harbor 401(k) provides the same features as a Traditional 401(k) but requires mandatory employer contributions. It also helps companies that encounter difficulty passing non-discrimination testing due to a mixture of highly compensated employees (HCEs) and non-highly compensated employees (NHCEs). Without a Safe Harbor, these companies’ 401(k) plans become "top heavy," or HCEs run the risk of having taxable income returned to them at the end of the year, even if they have already filed their tax returns. Safe Harbor contributions satisfy discrimination testing.

Solo(k) affords owner-only businesses the ability to make the maximum allowable contributions to their retirement plan — including Roth contributions — while providing access to accumulated balances through a loan feature. Business owners and their spouses receive the same advantages of a traditional
401(k) plan, including pre-tax contributions, a wide range of investment options and higher annual contribution limits than with a SIMPLE IRA plan.

Employees may defer up to $16,500 per year (or $22,000 per year if 50 or older) in either of Sure401k’s deferral options:

Regular Deferral is a pre-tax employee contribution, deductible in the year it is made. Contributions will be taxed upon distribution at the individual's then-current income tax rate.

Roth Deferral is an after-tax employee contribution, not deductible in the year it is made. And contributions will not be taxed upon distribution.

Fixed Company Match enables employers to match an employee’s contributions at a “fixed” rate for a simple, predictable way to help employees grow their retirement funds. This option is the most popular matching method for small businesses.

Discretionary Company Match allows an employer to match a percentage of each employee’s deferral, enabling employers the freedom to offer, raise or lower the prescribed “match” percentage without any constraints.

Discretionary Profit Sharing affords employers the ability to make one-time or periodic contributions to employees’ 401(k) plans, even if employees are not actively contributing to their own account. Profit Sharing contributions can be structured so employers make an equal contribution to everyone, or direct the contributions to specific employees. Sure401k will prepare estimated profit sharing calculations upon your request.

For both plans, the maximum contribution for any one person by law is the lesser of $49,000 or 25% of compensation, including both employee and employer contributions.