401(k) Tax Credits for Small Businesses

Credit Type	What It Offsets / Covers	Limit / Duration
Startup / Plan-Set-Up Costs	Administrative and setup costs of establishing a new 401(k) plan or converting from no plan.	For ≤ 50 employees: 100% of qualified costs, up to $5,000 per year (first 3 years). For 51--100 employees: 50% of qualified costs, up to $5,000 per year. Minimum credit floor: greater of $500 or $250 × number of eligible NHCEs.
Employer Contribution Credit	Employer matching contributions or non-elective contributions made to employee accounts.	Eligible for businesses with ≤ 50 employees (reduced credit 51--100 employees). Up to $1,000 per eligible non-HCE per year. Phases down over 5 years: 100% (yrs 1--2), 75% (yr 3), 50% (yr 4), 25% (yr 5).
Automatic-Enrollment Feature Credit	Adding an eligible automatic-enrollment feature (EACA) to a 401(k) or 403(b) plan.	$500 per year for the first 3 years after auto-enrollment is implemented. Applies to new plans or existing plans adding auto-enrollment.

🧾 What “Non-Highly Compensated Employee (NHCE)” Means

A NHCE is any employee who does not meet the definition of a “Highly Compensated Employee (HCE).”
HCE status is generally triggered if someone: owned more than 5% of the business (at any time during the current or prior year), or earned compensation above the HCE threshold (for example, > $100,000 in prior year — adjusted periodically) if the employer elects to apply that test.
Because the tax credits require at least one NHCE be covered by the retirement plan, a sole-owner business (with only the owner) typically cannot qualify for those credits.

⚠️ Other Important Limitations & Rules

The plan must be “new” — you cannot get the startup credit if you maintained a qualified plan covering substantially the same employees in the prior 3 years.
If you have between 51–100 employees, the startup credit is reduced (only 50% of qualifying costs) and employer-contribution credit may be reduced.
The contribution credit applies only to eligible employees (generally those earning ≤ $100,000 and not HCEs), and only up to $1,000 per eligible employee per year.
Auto-enrollment credit requires that the auto-enrollment feature meet the IRS’s eligible-auto-contribution-arrangement (EACA) requirements.

Powerful plans for businesses of any size

Our 401(k) plans come with low monthly costs and no transaction fees, so you won't have to pay extra for plan setup, plan transfers, or Form 5500 preparation.⁸

Starter

A simplified 401(k) with limited features and easy administration.

$39 / month

+ $4/mo per active participant

$6,000 employee contribution limit¹⁰
No employer contributions

Core

A foundational 401(k) with robust features and more plan design options.

$89 / month

+ $8/mo per active participant

$23,500 employee contribution limit¹⁰
Safe Harbor¹¹ or Traditional 401(k)
Features like employer contributions and profit sharing

Enterprise

Our most custom 401(k) with premium support and flexible pricing that scales as you grow.

$149 / month

+ active participant fee

$23,500 employee contribution limit¹⁰
Flexible pricing options
Premium support for plan admin and employees
Support for plan transfers

👤

Self-employed? Our Solo 401(k) is purpose-built to meet your needs, for just $49/mo + 0.15% account fee.⁹

8 Some plan services shown in the pricing grid are provided by third-party retirement plan providers such as Guideline. Tandy Consulting Inc. does not charge transaction fees for plan setup, plan transfers, or Form 5500 preparation; however, provider-level fees may still apply depending on the selected 401(k) provider’s terms.

9 The Solo 401(k) offering referenced above is provided directly by Guideline. Pricing, account fees, and terms are set by Guideline and may change at any time. Please refer to Guideline’s official disclosures for complete details.

10 Employee contribution limits shown above reflect IRS annual limits. Limits are subject to change each calendar year and vary by plan type. Confirm current limits with your plan provider.

11 Safe Harbor plan options and requirements are determined by IRS regulations and the selected provider. Availability and plan features may vary depending on the 401(k) provider used.

Tandy Consulting Inc. partners with independent retirement plan providers, including Guideline, to help businesses implement 401(k) plans. All investment advisory, custodial, administrative, and recordkeeping services are provided solely by the respective plan provider. Tandy Consulting Inc. is not affiliated with Guideline and does not provide investment, legal, or tax advice.

Investment advisory services for Guideline 401(k) plans are offered by Guideline Investments, LLC, an SEC-registered investment adviser. Administrative and recordkeeping services are provided by Guideline RK, LLC. Investing involves risk, including possible loss of principal. Plan features, fees, and provider terms are subject to change. Please review Guideline’s Form ADV, Form CRS, and fee disclosures for complete details.

Disclaimer: The information on this website is for informational and educational purposes only and should not be considered legal, tax, or accounting advice. Laws and regulations— including IRS rules and California conformity provisions—are subject to change, and guidance may evolve after publication. No guarantee is made regarding the accuracy or completeness of the content. Reading this website does not create a client relationship with Tandy Consulting Inc. For advice specific to your situation, please consult a qualified professional. ©2025 Tandy Consulting In. All rights reserved

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