Standard and Starter 401(k) plans are similar in nature – they both offer the opportunity for employees to contribute to a retirement plan through their employer and are funded with automatic deferrals pulled from employees' paychecks. However, there are also significant differences in the requirements and features of each.
Here’s a comparison between standard and Starter 401(k) plans at Guideline.
| Standard 401(k) | Starter 401(k) |
Who can open a plan | Any employer | Only employers that have not offered any retirement plan within the past 12 months |
Eligibility requirements | Eligibility restrictions may be set by employer for age (18- 21) or length of service (0, 3, 6, or 12 months) | All employees 18+ are immediately eligible |
Auto-enrollment | Required; default contribution rate of at least 1% | Required; default contribution rate must be between 3% and 15% |
Annual participant contribution limits (2024) | $23,000 | $6,000 |
Annual participant catch-up contribution limits (2024) | $7,500 | $1,000 |
Employer contribution | Optional | Not allowed |
Vesting | Employers contributions may be subject to a vesting schedule | Not applicable because employer contributions are not available |
Both traditional and Roth contributions | Yes | Yes |
Employee hardship withdrawals | Yes | Yes |
Employee 401(k) loans | Yes | No |
Subject to IRS non-discrimination tests | Yes — though some plan designs may automatically satisfy most tests, such as a Safe Harbor 401(k) | No |
Access to SECURE 2.0 tax credits | Yes, for new plans | Yes |
Form 5500 reporting | Generally required | Required |
*Note: Starter 401(k) plans are available starting for the 2024 plan year.
Can I move from one plan type to the other?
Moving to a Starter 401(k) plan
If an employer currently offers or will offer a standard 401(k), the plan will not be eligible to convert to a Starter 401(k) plan at a later date without terminating and waiting for a full 12 months to pass. Starter 401(k) plans are designed for businesses that have not offered any employer-sponsored retirement plan in at least 12 months.
Moving to a standard 401(k) plan
It is possible for a plan to convert from a Starter 401(k) to a standard 401(k) plan. However, the transition cannot take place within the same year. While an employer can request a plan amendment to move from a Starter 401(k) to a standard plan in advance, the change will not be effective until the beginning of the next calendar year.
Want to learn more about Starter 401(k) plans? Check out our employer or employee guides.