Both standard and Starter 401(k) plans help employees save for retirement, but each works a little differently. This article compares the 2 plan types and explains how to switch between them. Some requirements below may be specific to Gusto 401(k) plans.
Feature
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
Employer may set age (18 – 21) or service (0, 3, 6, or 12 months) requirements
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 contribution limit
$24,500 (2026)
$6,000 (2026)
Catch-up contributions (age 50+)
$8,000 (2026). Those ages 60 – 63 may contribute up to $11,250 (2026). Learn more about catch-up contributions.
$1,100 (2026)
Employer contributions
Optional
Not allowed
Vesting
Employer contributions may be subject to a vesting schedule
Not applicable (no employer contributions)
Traditional and Roth contributions
Yes
Yes
Hardship withdrawals
Yes
Yes
401(k) loans
Yes
No
IRS non-discrimination testing
Yes, though some plan designs (like Safe Harbor) may automatically satisfy most non-discrimination tests
No
Tax credits
Yes, for new plans
Yes
Form 5500 reporting
Generally required
Required
A plan that currently offers or has offered a standard 401(k) cannot convert to a Starter 401(k) without first terminating the plan and waiting at least 12 months. Starter 401(k) plans are only available to employers that have not sponsored any retirement plan in at least 12 months.
A Starter 401(k) can convert to a standard 401(k). The safest approach is to time the transition for the first day of the next plan year.
Important: Mid-year amendments from a Starter 401(k) to a standard 401(k) may carry risk due to limited IRS guidance on this type of transition.