Standard and Starter 401(k) plans differ in eligibility, contribution limits, and features. This article compares the two side by side and explains how to move from one to the other.
Gusto Retirement offers both standard 401(k) plans and Starter 401(k) plans so employers can choose the option that best fits their needs.
Both plan types let employees contribute to a retirement plan through their employer, using automatic deferrals from their paychecks. However, there are significant differences in requirements and features.
Here is a side-by-side comparison. Some of these requirements may be specific to Gusto Retirement plans.
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 and older 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
$24,500 (2026)
$6,000 (2026)
Annual participant catch-up contribution limits
Standard limit: $8,000 (2026). Limit for those ages 60 – 63: $11,250 (2026). Learn more about catch-up contributions.
$1,000 (2026)
Employer contribution
Optional
Not allowed
Vesting
Employer 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 nondiscrimination tests
Yes — though some plan designs may automatically satisfy most tests, like a Safe Harbor 401(k)
No
Access to SECURE 2.0 tax credits
Yes, for new plans
Yes
Form 5500 reporting
Generally required
Required
Moving between a Starter 401(k) and a standard 401(k) plan comes with some restrictions.
If you currently offer or will offer a standard 401(k), your plan is not eligible to convert to a Starter 401(k) without terminating the existing plan and waiting a full 12 months. Starter 401(k) plans are designed for businesses that have not offered any employer-sponsored retirement plan in at least 12 months.
You can convert from a Starter 401(k) to a standard 401(k) plan. However, it is safest to time the transition to take place on the first day of the next plan year.
Amendments to move from a Starter 401(k) to a standard plan mid-year may pose risks to the plan due to limited IRS guidance on Starter-to-standard 401(k) transitions and related rules.