# Retirement plans: 401(k), safe harbor and SIMPLE IRA

> Traditional and safe harbor 401(k)s, the SIMPLE IRA and state auto-IRAs, with every 2026 limit.

Source: https://lopifi.com/learn/startup-retirement-plans-401k-simple-ira
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**What retirement plan should a startup offer?** Traditional and safe harbor 401(k)s, the SIMPLE IRA and state auto-IRAs, with every 2026 limit.

No federal law requires a retirement plan either. A startup that offers one usually chooses between three: a [401(k)](https://lopifi.com/md/glossary/401-k-plan) tested every year, a [safe harbor 401(k)](https://lopifi.com/md/glossary/safe-harbor-401-k) that buys its way out of the test, and a [SIMPLE IRA](https://lopifi.com/md/glossary/simple-ira). Some states push the other way: where a company offers nothing, a [state auto-IRA](https://lopifi.com/md/glossary/state-auto-ira) may be mandatory.

| Limit | 2026 |
| --- | --- |
| 401(k) elective deferrals | 24,500 |
| Catch-up, age 50 or older | 8,000 |
| Catch-up, ages 60 to 63 | 11,250 |
| SIMPLE deferrals | 17,000 |
| SIMPLE catch-up, age 50 or older | 4,000 |
| All additions to one account (employee and employer) | 72,000 |
| Compensation counted | 360,000 |
| Highly compensated employee threshold | 160,000 |

The 2026 limits, from Notice 2025-67.

> “The limitation under section 402(g)(1) on the exclusion for elective deferrals described in section 402(g)(3), which includes elective deferrals made to the Thrift Savings Plan, is increased from $23,500 to $24,500.”

— [Notice 2025-67](https://www.irs.gov/pub/irs-drop/n-25-67.pdf) (PDF), 2026 retirement plan limits

> **Roth catch-up.** From 2026, an employee who earned more than $150,000 in FICA wages from the employer in 2025 must make any 401(k) catch-up contributions as Roth.

**Traditional 401(k)**
- Pro: Employer contribution optional
- Pro: Deferrals up to $24,500
- Con: Annual nondiscrimination tests, which can limit what highly paid employees defer
- Con: Form 5500 every year
- Best for: Companies whose staff all defer at similar rates

**Safe harbor 401(k)**
- Pro: Not subject to the complex annual nondiscrimination tests
- Pro: Deferrals up to $24,500
- Con: A required, fully vested employer contribution
- Con: Form 5500 every year
- Best for: Founders and highly paid early employees who want to defer the maximum

**SIMPLE IRA**
- Pro: Up to 100 employees
- Pro: Little administration
- Con: Lower deferral limit: $17,000
- Con: No other retirement plan allowed alongside
- Best for: Very small teams that want a cheap, simple plan

The three plans a startup chooses between.

> “is not subject to the complex annual nondiscrimination tests”

— [IRS — 401(k) plan overview](https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-overview), Traditional, safe harbor and SIMPLE 401(k) plans

**Scenario — The same deferral, two plans.** Suppose Northwind adds a plan in 2027 and an employee earning $60,000 defers 5%, $3,000. A safe harbor basic match puts in $2,400; a SIMPLE IRA's 3% match puts in $1,800. The safe harbor page works the formula.

In this lesson: the safe harbor 401(k) worked on Northwind, the SIMPLE IRA, and state auto-IRA mandates like CalSavers.

## Pages in this lesson

- [The safe harbor 401(k) match](https://lopifi.com/md/learn/startup-retirement-plans-401k-simple-ira/safe-harbor-401k-match) — 6 min. How does a safe harbor 401(k) match work?
- [SIMPLE IRA](https://lopifi.com/md/learn/startup-retirement-plans-401k-simple-ira/simple-ira-for-small-business) — 4 min. What is a SIMPLE IRA for small business?
- [State auto-IRA mandates](https://lopifi.com/md/learn/startup-retirement-plans-401k-simple-ira/state-auto-ira-mandates) — 4 min. Do employers have to offer a retirement plan? (CalSavers and state auto-IRAs)

## Where this lesson's rules come from

- [Notice 2025-67](https://www.irs.gov/pub/irs-drop/n-25-67.pdf) (PDF) — 2026 retirement plan limits (irs)
- [IRS — 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500](https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500) — 2026 catch-up contributions, including the age 60–63 limit (irs)
- [IRS — 401(k) plan overview](https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-overview) — Traditional, safe harbor and SIMPLE 401(k) plans (irs)
- [IRS — SIMPLE IRA plan](https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan) — SIMPLE IRA plans for employers with 100 or fewer employees (irs)
- [Wikipedia, “401(k)”](https://en.wikipedia.org/wiki/401(k)) — 401(k) (reference)

- **Track:** [Health & benefits](https://lopifi.com/md/learn/benefits)
- **Lesson:** Lesson 9 of 10 — 9 min
- **Terms taught:** [401(k) plan](https://lopifi.com/md/glossary/401-k-plan), [Safe harbor 401(k)](https://lopifi.com/md/glossary/safe-harbor-401-k), [SIMPLE IRA](https://lopifi.com/md/glossary/simple-ira), [State auto-IRA](https://lopifi.com/md/glossary/state-auto-ira), [Elective deferral](https://lopifi.com/md/glossary/elective-deferral)
- **Previous:** [ACA reporting: Forms 1094-C and 1095-C, Benefits · Lesson 8](https://lopifi.com/md/learn/aca-reporting-forms-1094-c-1095-c)
- **Next:** [The safe harbor 401(k) match](https://lopifi.com/md/learn/startup-retirement-plans-401k-simple-ira/safe-harbor-401k-match)
- **The course:** https://lopifi.com/md/learn