Is a Starter 401(k) Plan the Same as a Solo 401(k) Plan?

Starter 401k vs Solo 401k

A Starter 401(k) plan, which was introduced on June 15, 2022 by both Reps. Linda Sánchez (D-CA) and Darin LaHood (R-IL) in the Starter-K Act , is not the same as a solo 401k plan.

First, the Starter 401(k) plan is not yet effective.

Second, a solo 401k plan is for owner-only businesses whereas the Starter 401(k) plan would be for businesses with full-time W-2 employees that do not offer a traditional 401k plan.

Third, the annual contribution limits would still be higher for solo 401k plans. The annual solo 401k contribution limit for 2022, for example, is $61,000 plus $6,500 for those age 50 or older whereas the annual contribution limit for the Starter 401(k) plan would be much lower as it would be the same as the IRA contribution limit (the 2022 IRA contribution limit is $6,000) including the $1,000 catch-up contribution starting at age 50.

Lastly, the purpose of the Starter 401(k) plan is to push small businesses with 50 or less employees to offer a 401k plan to their W-2 employees at a lower cost with the hope of getting more Americans to save for retirement.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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