Guideline Launches Starter 401(k) Plan

Retirement plan provider Guideline Inc. has launched a 401(k) plan product for small businesses, offering a new kind of deferral-only retirement plan created in the SECURE 2.0 Act of 2022 to broaden retirement plan coverage, the company announced this week.

Guideline debuted what Congress called a starter 401(k) option for employers, supporting the law’s efforts to encourage plan sponsors to provide workplace retirement benefits.

Guideline’s Starter plan is a “simplified, out-of-the-box plan … exempt from IRS non-discrimination tests, which means it has fewer compliance requirements, but more limitations, including lower contribution limits and no employer contribution [requirements],” according to the announcement. 

Starter 401(k) plans generally require that all the company’s employees are enrolled in the plan, according to information from the Groom Law Group about the SECURE 2.0 provision. The starter 401(k) plans also have a $6,000 employee contribution limit and exclude employer contributions. Guideline’s plan includes automatic enrollment with a contribution level of 3% to 15% and requires employers to connect with eligible payroll providers, including Gusto and QuickBooks.

Plan sponsors that adopt the Guideline plan receive automated plan administration, recordkeeping, custodial services and guided employee onboarding. Guideline also provides 3(38) and 3(16) fiduciary services, including filing IRS and Department of Labor reports and signing Form 5500s, and a mobile app for savers to set up and manage their account.  

Guideline estimates that starter 401(k)s could help provide retirement benefits to more than 19 million U.S. workers.  

For workers, the prevalence of employer-sponsored retirement plans are a significant factor to encourage the likelihood that workers will accumulate significant assets for retirement.  

BlackRock and Human Interest research found the retirement savings of workers are largely driven by—or, alternatively, blunted by—the availability of “intuitive and automated savings tools,” according to a September 14 retirement insights post.