401(k) plan creation and operating assistance

401(k) plans are salary deferral plans. Employees may have up to $24,500 (2026) deducted from salary and deposited to their account. Those over age 50 may make an additional $8,000 “catch-up” contribution, while those age 60-63 can make a super “catch-up” contribution of $11,250.

The sponsoring employer may or may not contribute to the plan.

Frequently, the employer obligates the company to a “matching” contribution. For example, the employer may match an employee’s contribution dollar-for-dollar; may promise to match employee contributions at $0.50 on the dollar, etc.

Employers may also make additional discretionary contributions over and above the match.

In 2026, the employer and employee contributions, when combined, may not exceed $72,000.

Typically, a plan benefits a mix of rank-and-file employees and owner/managers. However, some employees may be excluded from a 401(k) plan if they:

• Are covered by a collective bargaining agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining.
• Have not attained age 21;
• Have not completed a year of service

Employees cannot be excluded from a plan merely because they are older workers.

Any established business entity such as a Corporation, Sole Proprietor, or Partnership seeking to maximize tax deductions and provide a substantial retirement benefit for owners and other long-term quality employees.

Most 401(k) plans offer a diversified menu of no-load mutual funds — from conservative options to growth-focused strategies — giving participants flexibility based on their goals and risk tolerance. Through an easy-to-use investment platform, contributions are allocated directly to participant accounts, and employees can log in anytime to review balances, adjust investments, or update contribution rates.

A safe harbor 401(k) plan is similar to a traditional 401(k) plan, but, among other things, must provide for employer contributions that are fully vested when made. However, the safe harbor 401(k) is not subject to many of the complex tax rules that are associated with a traditional 401(k) plan, including annual non-discrimination testing.

Both the traditional and safe harbor plans are for employers of any size and can be combined with other retirement plans.

Safe Harbor 401(k) Plan – Under a safe-harbor plan, you can match each eligible employee’s contribution, dollar for dollar, up to 3 percent of the employee’s compensation, and 50 cents on the dollar for the employee’s contribution that exceeds 3 percent, but not 5 percent, of the employee’s compensation. Alternatively, you can make a non-elective contribution equal to 3 percent of an employee’s compensation to each eligible employee’s account. Each year you must make either the matching contribution or the non-elective contribution.

• The ROTH 401(k) is an optional feature. It does not require a new document; however, one may amend an existing document.
• Employees at ANY income level can participate, and their contributions are made on an after-tax basis.
• One advantage of the ROTH feature in 401(k) plans is that qualified distributions are income tax-free if taken 5 years from the first deposit, upon attainment of age 59 ½, or due to death or disability.
• ROTH 401(k) employer contributions are matched on a pre-tax basis and are therefore subject to income tax on withdrawal.
  When employees terminate, they may roll over their ROTH 401(k) account to a ROTH IRA.
• For those 50 and over, the catch-up contribution may go to the ROTH 401(k) account. If compensation exceeds $150,000, the catch-up contribution MUST go into the ROTH 401(k) account.
• Contributions to the 401(k) account can be all ROTH or part ROTH and part traditional.
• ROTH and traditional deposits are all included in ADP testing.
• ROTH 401(k) deposits can be made regardless of one’s income level, unlike IRA limitations.

A 401(k) with automatic enrollment is one in which the employees are automatically enrolled and monies are deposited into the plan directly from their paycheck. Generally speaking, the employee’s contribution starts at 1% of gross income.

Think about it this way: $1 per $100 of gross wages is contributed on the employee’s behalf to the 401(k) and now becomes eligible for any and all employer matches.

The employee can withdraw from the plan at any time; there is no obligation to participate.

The thought is that, once enrolled, the employees will continue to contribute and therefore save for the inevitable retirement.

Here is an article from IRS.gov regarding this topic: Automatic enrollment

If a 401(k) plan was established anytime after January 1, 2023, and has 10 or more employees, automatic enrollment is required. Standard practices regarding automatic enrollment include a minimum deferral of 3% compensation, increasing by 1% annually until reaching 10%. Employees may opt out at any time.