A 401(k) is a type of retirement account employees can use to set aside a portion of their earnings for long-term savings.
Contributions
Both the employer and employee may contribute. Any employer contributions are applied to the employee’s traditional 401(k).
An employee's maximum contribution is based on their age:
Under 50: $24,500 in 2026 ($23,500 in 2025).
Age 50-59 or 64 and older: They can make a catch-up contribution of $8,000 in 2026 ($7,500 in 2025).
Age 60-63: They can make a catch-up contribution of $11,250 in 2025 and 2026.
The maximum contribution is per person, not per plan. An employee can split contributions between a Roth and a traditional 401(k), but the total amount they contribute cannot go over the limit.
Taxability
Traditional 401(k): Employee contributions are pre-tax. Withdrawals in retirement are taxable.
Roth 401(k): Many plans also offer employees the option to contribute to a Roth 401(k). Employee contributions are post-tax and withdrawals in retirement are not taxable.
State requirements
Requirements to offer a 401(k) to your team vary by state. If you're in a state with a state-sponsored retirement savings program, such as CalSavers, you can either:
Set up post-tax deductions for payroll, based on the taxation requirements—contact your state for guidance.
Offer retirement benefits through Gusto's 401(k) or one of our 401(k) partners: Betterment, Human Interest, or Vestwell. For more information on supported state retirement programs, contact our partners directly.
Set up a new Gusto 401(k)
The Gusto 401(k) powered by Guideline is a fully integrated 401(k) solution. Contributions automatically sync with payroll, and both employers and employees can access their 401(k) dashboards from Gusto. Click here for steps to set up a new plan.
Set up a new 401(k) with Betterment, Human Interest, or Vestwell
You can also set up a new 401(k) with a provider we partner with: Betterment, Human Interest, or Vestwell. Learn more about the benefits of an integrated 401(k) here.
Q: I’m setting up a new 401(k) plan, but I don’t see the benefit in my Gusto account. When will I see the benefits?
A: This is based on your 401(k) provider’s timeline. In some cases, plan implementation can take 2–3 months. Contact your 401(k) provider for more information.
Q: Why are employees missing from the 401(k) benefit tile in Gusto?
There are a few reasons why this could be happening:
Your 401(k) provider has not synced your employee elections yet
The employee has not yet enrolled in 401k
The employee is still in the waiting period
Your plan’s effective date is in the future
Contact your 401(k) provider for assistance.
Q: I ran payroll, but Gusto didn’t debit my account for 401(k) benefits. Why did this happen?
A: Your 401(k) provider will debit your company’s account. This typically happens within a few business days of the check date. Contact your 401(k) provider if you have any questions.
If your company already offers a 401(k), find your next steps below based on your provider:
If you offer a 401(k) through a third party, you can set up payroll deductions in Gusto. Employee deductions and company contributions will be left in your company bank account for you to send directly to your 401(k) provider. If the company contributes to employee 401(k)s, those contributions are applied to the employee’s traditional 401(k) (and not their Roth 401(k)).
Important: Before you start, make sure you have a list of all employees enrolled in this benefit, their personal contributions, and your company contributions per pay period.
To set up a new benefit deduction for your company:
Go to Benefits.
Under Financial Health, find Traditional or Roth 401(k). Click Set up.
Select I already have a 401(k).
At the bottom of the page, click I use a different provider.
Under Keep my current 401(k) provider, click Set up manual deduction.
Add a name for the benefit. This will appear on employee paystubs.
Add the name of the provider.
Choose the benefit type.
If you have employees who participate in both a 401(k) and Roth 401(k), set up deductions for one benefit at a time. Once deductions are set up for the first benefit, repeat these steps to set up the second.
Choose whether your plan uses the standard deduction limit or the special catch-up limit.
If the employee is 50-59 or 64 and older: They can make a catch-up contribution of $8,000 in 2026 ($7,500 in 2025).
If the employee is 60-63: They can make a catch-up contribution of $11,250 in 2025 and 2026, per a change made in the SECURE 2.0 Act.
Under Employee deduction per pay period, choose whether employees contribute a fixed dollar amount or a percentage of their earnings, and how much they should be deducted for.
If your employees contribute different amounts, you can customize each person’s deductions in step 16.
Under Contribution maximum, indicate if the company contributes and whether the contribution is capped. We keep track of the company contribution for your records and year-end taxes.
The IRS limits employer and employee contributions for people who earn over a certain amount. We recommend setting a max if any employee could exceed the compensation limit.
If the contribution amount varies by employee, you can customize each person's company contributions in step 16.
Click Save & continue.
Choose which employees should be deducted for this benefit.
Click Save.
If your employees each contribute different amounts to their 401(k)s, or if the company contribution is set up as partial matching, double-check and edit each employee’s individual deductions. Here's how:
Click View All Benefits to return to the Benefits page.
Under Active benefits, click the name of the benefit deduction you just created.
Find the name of the employee whose deduction or company contribution you need to change and click edit benefit.
Update their deduction or company contribution. If your company’s policy is set up with your provider as a partial matching contribution, we recommend you choose Amount ($) so you can record each employee’s specific contribution.
Click Save.
If you have employees who also contribute to another type of 401(k) (such as a Roth 401(k), repeat the steps above to set up employee deductions for the second type of benefit.
On the next regular payroll you run, deductions will appear on each enrolled employee's paystub as its own line item under Employee Earnings.
If anyone changes their 401(k) contribution after you’ve set up deductions in Gusto, edit their deductions with the steps below.
If deductions collected through Gusto reach the annual limit, Gusto automatically stops deductions. Keep in mind:
If you have employees who are older than 50 years old and eligible, remember to select the catch-up limit in the plan details you enter in Gusto.
If an employee contributes outside of Gusto payroll to any 401(k) that year, they're responsible for tracking their annual limit. Employees should contact their employer if they need to change or stop their deductions.
If an employee changes their contribution with your 401(k) provider, you’ll need to update their deductions in Gusto. If you’ve already run payroll with an old contribution amount, update the contribution with the steps below. Then, request a benefit adjustment so we can fix their past deductions.
Go to People.
Select the employee.
Go to their Benefits tab.
Next to the benefit you created, click Edit.
Change the benefit details for this employee.
Click Save.
The new deduction details will take effect on the next payroll you run.