SECURE 2.0’s new Starter 401(k) legislation is working for small businesses: Guideline
In this first year of the Starter 401(k), 75% of small employers went with this new 401(k) over their state-run auto-IRA program due to its simplicity, according to Jeff Rosenberger, COO of retirement platform Guideline.
Starter plans already account for 15%+ of Guideline’s business. All of its Starter plans are first-time plans, meaning the business had never offered their employees a retirement plan before.
Guideline, which compiled some interesting data that paints a compelling picture of how this legislation is impacting everyday Americans, looked at the average participant in a Starter 401(k) compared to someone saving in a Standard 401(k). What the company found is that Starter retirement plans are opening access to retirement savings for a whole new class of workers:
- 67% of Starter participants are paid hourly with an average salary of $66,000, compared with 41% of standard participants being paid hourly with an average salary of $97,000.
- 65% of employees offered a Starter 401(k) participate, compared with 85% of employees offered a standard 401(k), which feature auto-enrollment.
- On average, participants with a Starter 401(k) save 3% of their income, compared with participants with a standard 401(k) who save 5.7% of their income (both exclude employer match).
We discussed Starter 401(k)s with Jeff Rosenberger, COO of Guideline, who has worked in the asset management space for almost two decades.
Q: How are Starter 401(k) retirement plans opening access to retirement savings for a whole new class of workers?
A: Fueled by the SECURE 2.0 Act legislation, the Starter 401(k) retirement plans aim to give millions of workers a chance to save for retirement who might not otherwise be able to do so. Guideline was the first to market with a Starter 401(k), which was purpose-built to support businesses navigating these latest requirements so that they could offer their employees a 401(k) for the first time. Since launching the Starter 401(k) last year, we’re seeing thousands of businesses already leveraging this low-cost plan to offer their employees a meaningful benefit via retirement savings. Starter plans are first-time plans, so these businesses had never offered their employees a retirement plan before. This alone suggests that the legislation Congress passed is working.
With so many businesses now offering a Guideline Starter 401(k), we have unique insights into the average plan participant. What we found is that 67% of Guideline’s Starter participants are paid hourly with an average salary of ~$66,000, compared with 41% of standard 401(k) participants being paid hourly with an average salary of $97,000. This suggests that the Starter 401(k) is reaching a new and underserved subset of the American worker.
Q: How important is auto-enrollment with Starter 401(k)s?
A: Auto-enrollment helps employees—particularly young and low-income workers who might not have otherwise opted in—build their savings consistently, and we believe will ultimately contribute to improved financial wellness and reduced risk of outliving their savings. All of Guideline’s retirement plans feature auto-enrollment, and with Starter 401(k)s, employees are automatically enrolled at 3% of pay.
Q: How can small employers benefit from adding a Starter 401(k)?
A: The Starter 401(k) can be a great option for a small business that can’t afford the administrative complexities and heavier price tag of a standard 401(k), but still want to give workers an opportunity to save for retirement.
These plans have the advantage of potentially being cheaper and easier to administer than standard 401(k) plans. The automatic enrollment of eligible employees in Starter 401(k) plans may increase employee participation since employees don’t have to do anything to get started. And especially in states that require an employer-sponsored retirement plan, the Starter plans could be a great private alternative to the state-sponsored options, which may not typically have the direct payroll integrations.
Related: Starter 401(k) plans under SECURE 2.0: Helping small employers fast-track a retirement plan
From a recruiting and retention perspective, our research shows that employees still greatly value traditional benefits, like 401(ks). In fact, one in two employees would turn down a job offer from a company that did not offer a retirement benefit. From an employer perspective, 70% of employers also agreed that offering a retirement benefit has positively impacted their ability to recruit and hire talent.
Q: Why are the fees to administer Starter 401(k) plans much lower?
A: A Starter 401(k) is our most simplified, out-of-the-box plan, so it’s simpler to administer than a Standard 401(k), which brings the price down. Starter 401(k)s are exempt from IRS non-discrimination tests, which means the plan has fewer compliance requirements and doesn’t require the same amount of administrative resources as a standard 401(k).
Q: Since this was the first year of Starter 401(k)s, do you expect more employers to take advantage of the new program in 2025?
A: Yes, absolutely. Guideline’s Starter 401(k) plans have only been in the market for one year, and already, these plans account for 15%+ of our business month-over-month. Given that Starter plans have more straightforward compliance and fewer employer requirements, this helps lower the barrier for more employers to offer retirement benefits to their teams.
For California-based employers, as of December 31, 2025, all employers with 1-4 employees will be required to offer them a qualified retirement plan. In a recent survey of employers offering a Starter plan, 75% of them went with Guideline’s Starter 401(k) over the state-run program in their state due to its simplicity. Additionally, 82% said Guideline’s Starter 401(k) is the only plan offered that fits their needs—in other words, a standard 401(k) did not. So, we expect this growth to continue.
Q: What are employers’ feedback on the new Starter 401(k) plan?
A: It’s still in early days, but in a recent survey of employers offering a Starter plan, 75% of employers went with Guideline’s Starter 401(k) over the state-run program in their state due to its simplicity. Additionally, 82% said Guideline’s Starter 401(k) is the only plan offered that fits their needs—in other words, a standard 401(k) did not.