401(k)

What is a 401(k)?

A 401(k) is a US employer-sponsored retirement savings plan that allows employees to contribute a portion of their wages to a tax-advantaged investment account.

Contributions are typically made on a pre-tax basis, reducing the employee’s taxable income in the year of contribution. The plan grows tax-deferred, and taxes are paid upon withdrawal, usually during retirement. Some employers also offer Roth 401(k) options, where contributions are made post-tax but qualified withdrawals are tax-free.

Employers often offer matching contributions, which can significantly increase their employees’ retirement savings. Employers may opt to match 50% of an employee’s contributions, up to 6% of their pay. Contribution limits are set annually by the Internal Revenue Service (IRS); in 2025, for example, employees can contribute up to $23,000 (or $30,500 if aged 50 or older).

See also: The complete employer's guide to 401(k) retirement plans

Why does this matter for employers?

Offering a 401(k) plan helps employers attract and retain talent, especially in competitive industries. It demonstrates a commitment to employee financial wellness and may also provide tax advantages for the business, such as deductions for employer contributions or eligibility for small business tax credits when starting a plan.

When offering a 401(k), employers must also comply with fiduciary and administrative responsibilities, including:

• Selecting and monitoring investment options
• Providing plan disclosures and notices
• Ensuring contributions are deposited promptly
• Undergoing annual compliance testing (for traditional 401(k) plans)

Employers can choose between traditional 401(k) plans, Safe Harbor 401(k) plans (which avoid annual testing), or Solo 401(k) plans (for owner-only businesses).

See also: How to set up a 401(k) plan for your startup

How can Remote help?

Remote can support 401(k) plan administration in multiple ways, depending on your chosen service:

For Remote EOR customers:

Remote provides a 401(k) retirement plan for your team members that includes a company match program. Your team members can opt in or out, but must contribute to receive the employer match. Learn more.

For Remote PEO customers:

Remote's PEO service includes 401(k) options as part of its benefits package. The PEO 401(k) plan is administered under a Pooled Employer Plan (PEP), with Remote acting as the plan administrator⁠. Learn more.

For Payroll customers, Remote can process the deductions and contributions, and report them correctly if you provide the necessary information.