What is the difference between Roth and pre-tax contributions?

The difference between Roth (after-tax) and pre-tax contributions is when you pay taxes. With Roth contributions, you make contributions with after-tax dollars. Once the account has been open for 5 years, future withdrawals of both contributions and earnings are tax free unless you withdraw prior to age 59�. With pre-tax contributions, you get a tax break now, reducing your current taxable income. Contributions and earnings grow taxdeferred until withdrawn in retirement. Each offers different tax advantages. For more information, read the tax benefits fact sheet (PDF) .

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SMALL BUSINESS 401(k)

Q: What types of businesses can set up a Small Business 401(k)?

Corporations, partnerships and nonprofit organizations can establish Merrill Small Business 401(k) plans. If you're self employed or a sole proprietor, you may want to consider an Individual 401(k) .

Q: What are the potential tax benefits of a 401(k)?

Employer contributions are deductible by the business. Participant pre-tax contributions and earnings aren't taxed until they're withdrawn. For more information, read the guide to tax benefits (PDF) .

Q: How much can employers contribute annually?

Employers may match employee salary deferrals. Employers may make a profit sharing contribution for each eligible employee of up to the lesser of 25% of compensation or $61,000 for 2022. The maximum compensation on which contributions can be based is $305,000 for 2022.

Q: How much can employees contribute annually?

Employees may contribute up to $20,500 in 2022, or $27,000 for those 50 and older. The maximum combined employer and employee contribution is the lesser of 100% of compensation or $61,000 for 2022 (for those age 50 and older, $67,500) per participating employee.

Q: Does my business have to contribute to employee accounts?

It depends on the plan you select. Some plans don't require employer contributions. Others, such as safe harbor plans, do require a minimum contribution.

Q: What is a safe harbor plan?

Safe harbor plans automatically satisfy certain IRS nondiscrimination testing requirements. This plan type is designed to assure that your 401(k) plan is fair for all employees. With a safe harbor plan, employers are required to make contributions to employees' accounts, but there is some flexibility as to how they are made. For more information, read the guide to safe harbor plans (PDF) .

Q: How much does it cost to set up and administer a Small Business 401(k) for my company?

There is a one-time setup fee of $390 for new plans and $390 for converting an existing 401(k) plan to Merrill. Once the plan is set up, the monthly administration fee is $90.

Q: When are contributions fully vested?

Employee contributions vest immediately. Employer contributions may vest over time according to the terms of the plan selected, but employer safe harbor contributions vest immediately.

Q: What investment choices are offered?

You can choose from funds and/or model portfolios selected by Morningstar Investment Management LLC. Participants also have access to educational call center support from Plan Administrators, Inc. (PAi) and a suite of online investor-education resources.

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What's a Small Business 401(k)?

A Small Business 401(k)Footnote ⁹ is a streamlined and affordable retirement plan designed with small business owners and their employees in mind.

Small business 401(k) features

Employees' primary financial goal is saving for retirement and 66% say their 401(k) will build enough savings for retirement.Footnote ⁵

Item 1 of 4 Enjoy contribution limits three times higher than that of a traditional IRAFootnote ¹

Item 2 of 4 Make contributions that are generally tax deductible by the businessFootnote ²

Item 3 of 4 Reduce your admin with a plan that's straight forward and easy to manageFootnotes ^3,4

Item 4 of 4 Get the benefits of a big company with small business convenience

Discover affordable straightforward pricing

Pricing for your businessFootnote ⁵

One-time set up fee:

$390

Monthly administration:

$90

Pricing for individualsFootnote ⁶

Monthly recordkeeping fees:

Annual asset based costsFootnote ¹:

0.52%

Footnote ¹For investment fiduciary services (0.07%) participant servicing through the call center (0.20%) and account services for the ongoing product management, vendor oversight, trading and custodial services (0.25%)

Fee example: Sue has $10,000 in her account. This year, she will have approximately $52 withheld to cover the asset-based fee and $48 ($4 x 12 months) for recordkeeping fees.

Key insights

The Merrill Small Business 401(k) can give you benefits of a big company 401(k) plan but is designed with small business owners in mind — it's streamlined, convenient and affordable. Benefits like the opportunity for tax deductions for your business, investment fiduciary support and call center educational support for your employees help make establishing a Merrill Small Business 401(k) a smart retirement solution.

Learn more about the Merrill Small Business 401(k)

Convenience

Receive help from a consultant while opening your account. Easy-to-understand pricing is generally lower than many comparable 401(k) plans. Our simple, secure platform lets you quickly check in.

Big plan features

Investment menu and model portfolios tailored by Morningstar LLC helps take the guesswork out of your plan's fund selection.Footnote ⁴

Tax benefits

Administrative costs, plan expenses, and company contributions, generally are tax deductible by the business. Your business may also be eligible for employee tax credits.Footnote ¹

Investment flexibility

Employer contributions can be structured as discretionary. This plan can be used in conjunction with another tax-qualified retirement plan while also being customizable.

What's a key difference between a Small Business 401(k) and a SIMPLE IRA?

Any type of employer regardless of their business size can open a Small Business 401(k) plan, while a SIMPLE IRA is designed for businesses with 100 or fewer employees. In addition, try our Retirement Account selector tool.

Learn more about small business retirement plans Merrill

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Tell us about yourself and your business, and we'll customize a plan to fit your needs.

Step 2 of 3

REVIEW YOUR PROPOSAL

We'll send you a proposal for your review. If you want, you can modify plan features before purchasing.

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PURCHASE YOUR PLAN

After reviewing your proposal, you can purchase your plan online in just a few minutes.

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Or call us at 866.890.4177

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Explore all plans available for small business

Get more details about small business retirement plans available at Merrill and find the one that works best for your needs.

SEP IRA plans at Merrill SIMPLE IRA plans at Merrill Individual 401(k) plans at Merrill

Learn more about retirement plans at Merrill

Frequently Asked Questions

Expand all

What types of businesses can set up a Small Business 401(k)?

What are the potential tax benefits of a 401(k)?

How much can employers contribute annually?

Depending on the plan's terms, employers may match employee salary deferrals and/or make profit sharing contributions for eligible employees. An employer's contribution cannot exceed 25% of the employee's compensation (if you are self-employed, 20% of your net earnings from self-employment). Also, the maximum combined employer and employee contribution is the lesser of 100% of compensation or $70,000 for 2025Footnote ⁹ (excluding catch-up contributions for those age 50 and older). The maximum compensation on which these contributions can be based is $350,000 for 2025.Footnote ²

How much can employees contribute annually?

Employees may contribute up to $23,500 in 2025, employees aged 50 and older can also contribute an additional $7,500 in catch-up contributions, totaling $31,000. A new, higher catch-up contribution limit of $11,250 is available for employees aged 60-63, allowing them to contribute a maximum of $34,750.

The maximum combined employer and employee contribution is the lesser of 100% of compensation or $70,000 for 2025 (for those age 50 and older, $77,500) per participating employee.Footnote ²

Does my business have to contribute to employee accounts?

What is a safe harbor plan?

Safe harbor plans automatically satisfy certain tax law nondiscrimination testing requirements. This plan type is designed to assure that your 401(k) plan is fair for all employees. With a safe harbor plan, employers are required to make contributions to employees' accounts, but there is some flexibility as to how they are made. For more information, read the guide to safe harbor plans (PDF).

How much does it cost to set up and administer a Small Business 401(k) for my company?

What is the difference between Roth and traditional 401(k) contributions?

The basic difference between Roth and traditional 401(k) contributions is when taxes are paid out. For Roth contributions, federal taxes are due in the same year you contribute. When you take a qualified withdrawal from your 401(k), earnings gained on top of the Roth contributions you made will be tax free. A qualified withdrawal for Roth contributions is one that is made at least five years after the year of your first designated Roth contribution (counting the first year as part of the five) and is made on or after attainment of age 59½, disability, or death. IRS Retirement topics, Designated Roth Account popup State income tax laws vary, and we recommend consulting with a tax professional to determine how your state treats Roth distributions from qualified plans (which include 401(k) plans).
Traditional 401(k) contributions do not require taxes to be paid at the same time you contribute. For traditional 401(k) contributions, taxes on contributions and earnings are due when withdrawn. Consult with a tax professional to determine further requirements, if any, on your 401(k) withdrawal for traditional 401(k) contributions.

When are contributions fully vested?

What investment choices are offered?

Can participants withdraw funds or take loans from their 401(k)s?

What is the plan establishment deadline?

The deadline to establish a new plan depends on the type of plan you want to adopt and the type of contributions you want to be available for the first plan year. If you want employees to be able to make contributions, you will generally want to allow enough time for them to do so before the plan year ends. However, if you want to adopt a safe harbor plan, your deadline to establish the plan is October 1 of the plan year assuming you establish a calendar year plan, but you will need to send a notice to participants at least 30 days before that.

To adopt a non-safe harbor 401(k) plan, the deadline is the tax filing deadline (including extensions) for your business. However, only a profit sharing contribution could be made retroactively for the first plan year if you wait until the next tax year to adopt the plan.

Is IRS reporting required?

When are the plan purchase deadlines?

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Footnote ¹ Contribution limits apply for 2025, per tax law cost-of-living adjustment. Amounts for subsequent years may vary.

Footnote ² Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary. For more information visit the IRS website popup. You should talk to your legal and/or tax advisors before making any financial decisions.

Footnote ³ Plan- and participant-level administrative and recordkeeping services for Merrill Small Business 401(k) plans are provided by Ascensus. Investment advisory and fiduciary services are provided by Morningstar Investment Management LLC, a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar Investment Management LLC is a provider of investment management solutions, including investment advisory and retirement plan services. Educational call center support will be provided by Ascensus. Bank of America Corporation, Ascensus and Morningstar Investment Management LLC are not affiliated.

Footnote ⁴ Morningstar Investment Management LLC selects the investments and is responsible for the ongoing monitoring and maintenance of the investments and model portfolios. Merrill is responsible for ongoing product management and vendor oversight, as well as trading and custodial services of plan assets and monthly transaction statements.

Footnote ⁵ Fees will be deducted from the business account.

Footnote ⁶ Fees will be deducted from each participant's account.

Footnote ⁷ Please consider the advantages and disadvantages of taking a loan before initiating one.

Footnote ⁸ While you can contribute a profit sharing contribution up to 100% of an employee's eligible compensation, you can only deduct up to 25%.

Footnote

The endorsement of Morningstar Investment Management LLC ("Morningstar") for the MESB 401(k) Program is not made by Merrill in the capacity of a client of Morningstar or as a MESB 401(k) Program client. Cash and non-cash compensation will be provided to Merrill for this endorsement if you enroll in the MESB 401K Program. Merrill has material conflicts of interest giving this endorsement of Morningstar on this website because Merrill's compensation for services under the MESB 401(k) Program is dependent on customer use of Morningstar's investment advisory services. Morningstar's investment advisory services are the only investment advisory services offered under the MESB 401(k) Program and lack of customer's use of Morningstar's investment advisory services would, therefore, result in Merrill unable to receive compensation for this product. For more information about the compensation provided to or received by Merrill, Merrill's material conflicts of interest in giving the endorsement, and disclosure of past disciplinary matters of Merrill, please read more information here (PDF).

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Investment products offered through Merrill Lynch, Pierce, Fenner & Smith Incorporated, and insurance and annuity products offered through Merrill Lynch Life Agency Inc.:

Are Not FDIC Insured	Are Not Bank Guaranteed	May Lose Value
Are Not Deposits	Are Not Insured by Any Federal Government Agency	Are Not a Condition to Any Banking Service or Activity

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

The performance data contained herein represents past performance which does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance information current to the most recent month end, please contact us.

Net Asset Value (NAV) returns are based on the prior-day closing NAV value at 4 p.m. ET. NAV returns assume the reinvestment of all dividend and capital gain distributions at NAV when paid.

Market price returns are based on the prior-day closing market price, which is the average of the midpoint bid-ask prices at 4 p.m. ET. Market price returns do not represent the returns an investor would receive if shares were traded at other times.

Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Mutual Funds and Exchange Traded Funds: Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

Closed End Funds: Expense Ratio – Gross Expense Ratio is the ratio of the fund's total annual operating expense (before waivers or reimbursements) to average net assets as of the date of the fund's most recent annual report. You should also review the fund's detailed annual operating expenses disclosed by the fund in its annual reports, semi-annual reports, and other public filings.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory and other services. Additional information is available in our Client Relationship Summary (Form CRS) (PDF).

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp.").

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. ("MLLA") is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

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With Merrill Edge Self‑Directed, get unlimited free online stock, ETF and option trades with no trade or balance minimumsFooter footnote ^b

Options contracts and other fees may applyFooter footnote ^a

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Other fees may apply. Free and $0 means there is no commission charged for these trades. $0 option trades are subject to a $0.65 per-contract fee. Sales are subject to a transaction fee of between $0.01 and $0.03 per $1,000 of principal. There are costs associated with owning ETFs. To learn more about Merrill pricing, visit our Pricing page.
Footer footnote

Merrill waives its commissions for all online stock, ETF and option trades placed in a Merrill Edge^® Self-Directed brokerage account. Brokerage fees associated with, but not limited to, margin transactions, special stock registration/gifting, account transfer and processing and termination apply. $0 option trades are subject to a $0.65 per-contract fee. Other fees and restrictions may apply. Pricing is subject to change without advance notice.

For broker-assisted trades through Merrill Edge, you will be charged a fee equal to the lower of $29.95 or 5.00% of the principal amount of the transaction. Further, there are indirect fees, such as annual management and other similar fees, that are charged by the manager or sponsor of an exchange-traded fund and of a closed-end fund, as disclosed in the product's prospectus.

Investment products offered through Merrill Lynch, Pierce, Fenner & Smith Incorporated, and insurance and annuity products offered through Merrill Lynch Life Agency Inc.:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

Are Not Deposits

Are Not Insured by Any Federal Government Agency

Are Not a Condition to Any Banking Service or Activity

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

Net Asset Value (NAV) returns are based on the prior-day closing NAV value at 4 p.m. ET. NAV returns assume the reinvestment of all dividend and capital gain distributions at NAV when paid.

Market price returns are based on the prior-day closing market price, which is the average of the midpoint bid-ask prices at 4 p.m. ET. Market price returns do not represent the returns an investor would receive if shares were traded at other times.

Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Mutual Funds and Exchange Traded Funds: Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

Closed End Funds: Expense Ratio – Gross Expense Ratio is the ratio of the fund's total annual operating expense (before waivers or reimbursements) to average net assets as of the date of the fund's most recent annual report. You should also review the fund's detailed annual operating expenses disclosed by the fund in its annual reports, semi-annual reports, and other public filings.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory and other services. Additional information is available in our Client Relationship Summary (Form CRS) (PDF).

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. ("MLLA") is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

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SMALL BUSINESS 401(k)

Boost your business with competitive retirement benefits

What's a Small Business 401(k)?

Small business 401(k) features

Discover affordable straightforward pricing

Pricing for your businessFootnote 5

Pricing for individualsFootnote 6

Key insights

Convenience

Big plan features

Tax benefits

Investment flexibility

What's a key difference between a Small Business 401(k) and a SIMPLE IRA?

Get started with a Small Business 401(k) in 3 easy steps

ANSWER QUESTIONS

REVIEW YOUR PROPOSAL

PURCHASE YOUR PLAN

Additional resources

Related articles

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TIPS FOR BUILDING WEALTH DURING PEAK EARNING YEARS

Additional education

RETIREMENT PLANNING GUIDE

HOW TO START INVESTING

Explore all plans available for small business

Frequently Asked Questions

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Unlimited $0 Trades

Boost your business
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Pricing for your businessFootnote ⁵

Pricing for individualsFootnote ⁶