Job seekers are seeing increasingly more options for employment and are enticed by the benefits of joining a startup. However, financial stability is an important factor, and employees want to know if that means sacrificing essential benefits like the 401(k).
Typically, startups that are just starting can’t afford to offer 401(k) plans. However, most startups will eventually provide some variety of a 401(k) plan as they progress. Startups like Calm, Curology, and Unite Us are a few examples of startups that offer 401(k) along with other great benefits.
This article will explain why it’s easier than ever for startups to offer 401(k) plans to employees if they match contributions and the type of plans they may offer. It’ll also share some examples of startups currently offering retirement packages and the benefits of joining a startup company.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Why More Startups Today Are Offering 401(k)?
In the past, employee retirement plans were less feasible to attain. Their high costs and complicated nature made them more suited for larger companies with thousands of employees. However, it has become much easier for startups and small businesses to offer comprehensive retirement plans to their employees in recent years.
Below are a few reasons why it is reasonable for a startup to offer 401(k) to their employees:
401(k) Has Become More Affordable
In December 2019, former President Donald Trump signed the Setting Every Community Up for Retirement (SECURE) Act into law. This act increased the tax benefits for businesses offering 401(k) benefits. Startups can now earn a credit of up to $5,000, and automatic enrollment can make them an additional $1,500 in credits per year for 3 years.
This alone makes the idea of offering retirement packages more rewarding. Not to mention, many more 401(k) plans are available to choose from than before, with many tailored specifically for startups.
This surplus keeps the costs reasonable and allows companies to make the best decision for them. Also, most plans offer a flat rate per employee rather than a percentage of managed assets.
Technology Makes 401(k) Contributions Easier
Previously, starting and maintaining 401(k) plans for employees involved enormous paperwork and time spent figuring it out. Today, in this digital environment setting it up can be as simple as visiting the provider’s website.
Do Startups Match Contributions?
Like any employer, matching contributions aren’t a guarantee since they’re not required. However, since many startups seek top talent to help their business grow, they’ll offer matching contributions to incentivize their employees to apply.
Making this decision is also beneficial to the business because employer contributions are also tax-deductible. The most common employer match is half of what the employee matches up to 6% of their pay. However, few companies match more or less.
Types of 401(k) Startups May Offer
Retirement platforms like Guideline and Human Interest make it more straightforward and more affordable for startups to offer quality 401(k) plans to their employees without breaking the bank.
Below are two popular plans that they may offer:
Safe Harbor
The Safe Harbor 401(k) plan is a retirement plan that requires a minimum contribution for all employees. There isn’t a vesting period for these contributions, meaning they belong to the employee once contributed.
This type of plan levels the playing field across all pay scales, job titles, and tenure, which helps companies that offer it pass the IRS nondiscrimination test. This plan has 3 types:
- Elective (basic match): Company matches 100% of employee contributions up to 3% of pay plus an additional 50% of what they contribute up to 2% of their pay
- Elective (enhanced match): Company matches 100% of employee contributions up to 4% of their pay
- Non-elective: Company contributes 3% of employee’s pay regardless of whether they make contributions
Traditional
A traditional 401(k) plan is a retirement plan that allows employees to make pre-tax contributions to their plan. Employers aren’t required to make contributions to this plan, but it can be subject to a vesting period if they choose to.
Additionally, they can elect to contribute to all participants or based on the employee’s contribution. This type of plan is subject to nondiscrimination testing. Therefore, employers must perform annual tests to ensure that they meet requirements [Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests].
Simple
The Simple 401(k) plan is a simplified version of the traditional. However, in this version, the employer must make contributions. They can choose to make matching contributions up to 3% of the employee’s pay or a non-elective contribution of the eligible employee’s salary. Additionally, employees are vested in all contributions.
Employers can allow hardship withdrawals and loans to this plan for the benefit of their employees, and this type of plan isn’t subject to nondiscrimination testing.
Startups can qualify for this type of 401(k) plan if they employ less than 100 people, don’t have any other form of retirement plans, and file a Form 5500 each year.
Startups That Offer 401(k)
The market for quality employees is getting more competitive by the day, and startups have to fight to stand amongst larger corporations. Nonetheless, many stand out as not only offering great benefits but, according to Forbes, being one of the best places to work. Check them out below.
Curology
Curology is a skincare company that makes customized products for its clients. The company is headquartered in San Francisco, California, and was founded by Dr. Lortscher and his family in 2014. As of today, the company employs about 450 individuals. It offers:
- Parental Leave
- Health, dental and vision insurance
- 401(k) plan
- Flexible spending plans
- Commuter benefits
- PTO
- Expensed commuter benefits
- Daily paid lunch
- Free Curology subscription
Calm
Calm is a software company that offers meditation and wellness products via the Calm application. The company is headquartered in San Francisco, California, and founded by Alex Tew and Michael Smith in 2021. To date, the company employs around 50 people and manage to offer incredible benefits like:
- 401(k)
- Extended learning budget
- Parental leave
- 100% paid health, dental, and vision
- PTO
- Fitness/wellness stipends
- Work from home stipend
Unite Us
Unite Us is a technology company that connects social service and health organizations with community members that need their services. It is headquartered in New York City, New York, founded by Dan Brillman and Taylor Justice in 2013. Unite Us now employs about 570 people and offers the following benefits:
- Parental leave
- 401(k) Match
- PTO
- Commuter benefits
- Health, dental and vision coverage
Benefits of Joining a Startup
Aside from offering great benefits, startups may be appealing to job seekers for many other reasons. Because they’re smaller than other corporations, startups have a much different and close-knit culture. To grow and become successful, they have to employ driven and passionate people.
In the early stages, employees may find themselves wearing different hats within the company. This gives them a feeling of spontaneity and purpose that might not easily be found at larger companies.
Lastly, you get to feel like you’re a part of something great. Your efforts in a startup company will be easily recognizable, and you will be there to witness the growth.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
Most startup companies offer 401(k) plans because they have become more affordable and simplified due to new laws and competition. Some startups also offer a 401(k) match and other lucrative benefits. There’s much competition to secure top talent, and startups don’t want to lose out on the right individuals to help scale their business.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
Affiliate Disclosure: We participate in several affiliate programs and may be compensated if you make a purchase using our referral link, at no additional cost to you. You can, however, trust the integrity of our recommendation. Affiliate programs exist even for products that we are not recommending. We only choose to recommend you the products that we actually believe in.
Recent Posts
Exploring Social Trading: Community, Profit, and Collaboration
Have you ever wondered about the potential of social trading? Well, that curiosity led me on a fascinating journey of surveying over 1500 traders. The aim? To understand if being part of a trading...
Ah, wine investment! A tantalizing topic that piques the curiosity of many. A complex, yet alluring world where passions and profits intertwine. But, is it a good idea? In this article, we'll uncork...