Coming Soon: The Starter 401(K) Plan!

Author: Penelope Team

Exciting news! Penelope is rolling out a new product this January: the Starter 401(k).

This type of employer-sponsored retirement plan is brand new in 2024. It was first introduced as part of Secure 2.0, which Congress passed in December 2022. Financial companies will be able to start offering the product as of January 2024.

So how does the Penelope Starter 401(k) work? And how is it different from our Safe Harbor 401(k) product? Here are all the details you need to know:

A starter 401(k) works in much the same way as a regular 401(k) in that you can easily set up an account through our platform. Upon eligibility, employees are automatically enrolled at a 3% deferral rate and will be invested in a Vanguard Date Fund corresponding to their retirement year. Employees can choose to opt-out or to increase the amount they defer up to 15%. The total an employee can contribute to a Starter 401(k) in 2024 is $6,000 per year, $7,000 for employees over 50.

Penelope continues to be transparent and affordable with our pricing as we roll out this new plan. For a Starter 401(k), there’s a $49 monthly administration fee for all employers, and then an additional $3 monthly fee for each active participant. Employers cannot contribute to an employee’s Starter 401(k).

This makes it a cost-effective option for small businesses that want to offer an employer-sponsored retirement plan but choose not to match. And the tax benefits of providing a retirement plan to your employees are abundant—many businesses can save as much as $16,500 in credits (of course you’ll want to consult your accountant).

The Penelope Starter 401(k) is a great alternative to state-sponsored plans like Cal Savers or RetirePathVA. Many of the state-sponsored plans pass the cost onto the employees, which can have a big impact on how much they are able to save for retirement.

“One of our goals at Penelope is to make sure the lowest-level employee still has a shot of saving $1 million for retirement,” says Jean Smart, Penelope CEO and founder. “With the Starter 401(k), small business owners have an affordable option they can offer their employees. The benefits are countless. The most important thing is to just get started”

If you’re interested in learning more about employer-sponsored retirement plans and their many tax incentives, book a call to learn more about Penelope’s 401(k) options.

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