Long Island Business Owners
Small Business 401(k) Plans on Long Island: A Guide for Business Owners
Setting up a small business 401(k) on Long Island is one of the smartest things you can do for your employees, your taxes, and your own retirement. It also makes you a plan fiduciary. No pressure. We can help.
The Basics
What Is a Small Business 401(k) Plan?
A small business 401(k) plan is an employer-sponsored, tax-advantaged retirement savings account that allows business owners and their employees to set aside pre-tax (or Roth after-tax) income for retirement. In 2026, employees may contribute up to $23,500, with an additional $7,500 catch-up contribution allowed for those age 50 and older (and an extra $11,250 catch-up for those ages 60 to 63, per SECURE 2.0 provisions). Contribution limits are set by the IRS annually and may be subject to change. Employer contributions via matching or profit-sharing can bring the total combined limit to $70,000 per participant in 2026.
As the plan sponsor, the business owner takes on a fiduciary role — a legal obligation to act in the best interest of plan participants when selecting investments, service providers, and plan design. That word "fiduciary" should feel familiar: it is the same standard N Financial Plans holds itself to every day on behalf of its own clients.
Source: IRS Publication 560 (2026); SECURE 2.0 Act of 2022. Contribution limits are subject to annual IRS adjustments.
2026 Key Contribution Limits
-
1
Employee Elective Deferral
Up to $23,500 per year (pre-tax or Roth)
-
2
Age 50+ Catch-Up Contribution
Additional $7,500 (ages 50 to 59 and 64+)
-
3
SECURE 2.0 Super Catch-Up (Ages 60 to 63)
Additional $11,250 catch-up for this age window
-
4
Total Combined Limit (Employer + Employee)
Up to $70,000 per participant in 2026
Per IRS Notice 2025-82. Limits subject to annual adjustment. Consult a qualified advisor for your specific situation.
Side-by-Side Breakdown
Comparing Small Business Retirement Plan Types in 2026
Not every retirement plan is right for every business. Here is a plain-language comparison of the five most common plan types for Long Island small business owners, from the solo shop in Huntington to the growing firm in Melville with 40 employees.
| Plan Type | Best For | 2026 Employee Limit | Employer Contributions | Admin Complexity | Roth Option |
|---|---|---|---|---|---|
| Solo 401(k) | Self-employed, no W-2 employees (owner + spouse only) | Up to $23,500 employee + profit-sharing up to $70,000 total | Up to 25% of compensation as profit sharing | Low (until assets exceed $250,000; then Form 5500 required) | Yes |
| SEP-IRA | Self-employed or small teams (up to ~5 employees) | Employer only; up to 25% of compensation, max $70,000 | Required uniformly for all eligible employees | Very low (no annual IRS filing) | No |
| SIMPLE IRA | Small employers with up to 100 employees | Up to $16,500 employee deferral in 2026; $3,500 catch-up (50+) | Required: 2% non-elective OR 3% match of compensation | Low-moderate (minimal IRS filing requirements) | No (Roth SIMPLE added by SECURE 2.0 but limited adoption) |
| Traditional 401(k) | Businesses with 2 to 50+ employees seeking full flexibility | Up to $23,500 employee deferral; catch-ups apply | Discretionary matching or profit sharing | Moderate to High (annual Form 5500, nondiscrimination testing) | Yes |
| Defined Benefit Plan | High-income business owners wanting maximum tax-deferred savings | Actuarially determined; can exceed $275,000/yr in benefits | Required annual funding contribution (actuarially set) | High (actuarial certification, annual IRS filing) | No (traditional pension structure) |
Source: IRS.gov, SECURE 2.0 Act of 2022. Figures are for 2026 plan year. Contribution limits subject to annual IRS adjustment. Individual results vary based on compensation, plan design, and eligibility rules. This table is for educational purposes only and does not constitute investment advice.
Your Legal Obligation as Plan Sponsor
You Are a Plan Fiduciary. Here Is What That Actually Means.
When you sponsor a 401(k) plan for your Long Island business, the Employee Retirement Income Security Act (ERISA) designates you as a plan fiduciary. This is not a title to put on your business card. It is a legally enforceable obligation to:
- 1 Act solely in the interest of plan participants and beneficiaries
- 2 Offer a diversified menu of investment options to minimize the risk of large losses
- 3 Ensure plan expenses are reasonable and benchmarked against market rates
- 4 Follow the terms of your plan document and administer the plan consistently
- 5 Document your decision-making process, especially for investment selection and service provider fees
According to the U.S. Department of Labor, fiduciaries who fail to meet these obligations can be held personally liable for plan losses. That is not a scenario anyone wants.
The Fiduciary Parallel
This is exactly why working with a fee-only, fiduciary advisor to design and manage your plan matters so much. At N Financial Plans, our advisors are fiduciaries to our clients the same way you are a fiduciary to your employees. We do not earn commissions by steering you toward high-fee plan providers. We earn a flat, transparent fee to give you unbiased guidance.
When you hire a commission-based 401(k) salesperson, you are asking the person who profits from your plan choices to help you manage your fiduciary duty. Conflict of interest? A little bit, yes.
N Financial Plans Difference
- Zero commissions accepted, ever
- CRPS credential (Chartered Retirement Plans Specialist)
- 80+ qualified retirement plans under management
- Fee-only fiduciary model, legally required to act in your interest
Getting Started
How to Set Up a Small Business 401(k) on Long Island
Setting up a 401(k) for your Long Island business involves more steps than opening a checking account, but far fewer than people expect. Here is the process in plain English.
Choose Your Plan Type
Use the comparison table above as your starting point. A solo business owner may find a Solo 401(k) or SEP-IRA most efficient. A business with employees will likely evaluate a SIMPLE IRA or Traditional 401(k) depending on headcount, desired flexibility, and budget for employer matching.
Adopt a Plan Document
Every qualified retirement plan must be established with a formal plan document that sets out its rules, eligibility requirements, vesting schedule, and investment options. This document is the legal foundation of your plan. If it is poorly drafted, you will discover that at the worst possible time (think IRS audit).
Select a Trustee and Custodian
As the plan sponsor, you are likely also the plan trustee, which means you hold legal responsibility for plan assets. You will also select a custodian (a financial institution that holds the assets) and a recordkeeper (who tracks contributions and participant balances). These costs vary widely, and evaluating them is part of your fiduciary duty.
Design the Investment Menu
ERISA requires you to offer a prudent, diversified lineup of investment options. You are not required to offer every fund on the planet, but you must be able to document that your selection process was reasonable and consistent with participants' interests. This is one of the highest areas of fiduciary litigation risk for small business owners.
Communicate the Plan to Employees and Enroll
ERISA mandates specific participant disclosures, including Summary Plan Descriptions (SPDs) and annual fee disclosures. You must provide these on time or face penalties. After setup, enrollment can be automatic (employees are enrolled unless they opt out) or voluntary. Research suggests automatic enrollment significantly increases participation rates.
File Annual Reports and Maintain Ongoing Compliance
Most 401(k) plans must file Form 5500 with the IRS and DOL each year. Plans with more than 100 participants require an independent audit. Nondiscrimination testing (ADP/ACP tests) must be run annually to ensure highly compensated employees are not benefiting disproportionately. Safe harbor plan designs can eliminate testing requirements entirely — and are often worth exploring for smaller firms.
The Business Case
Why a 401(k) Makes Sense for Your Long Island Business
A well-structured retirement plan offers tax advantages for the business, a powerful employee retention tool, and the owner's own path to a comfortable retirement. Here are the numbers that matter.
$70K
Maximum combined contribution per participant in 2026
100%
Of employer contributions are generally tax-deductible to the business
$5,000
Up to $5,000/yr in SECURE 2.0 startup tax credits for new plans (small employers)
80+
Qualified retirement plans managed by N Financial Plans
Source: IRS.gov; SECURE 2.0 Act of 2022. Tax outcomes vary by business structure, income level, and individual circumstances. Consult your advisor and tax professional. N Financial Plans holds an IRS Enrolled Agent (EA) on staff.
Why N Financial Plans
A Long Island Advisor Who Has Actually Done This 80+ Times
Most financial advisors treat small business retirement planning as an afterthought. At N Financial Plans, it is a credential.
CRPS Credential
Amir Noor, CFP, EA, CRPS holds the Chartered Retirement Plans Specialist designation — one of the few credentials focused specifically on employer-sponsored plan design, trustee responsibility, and compliance. Your plan is not a side project here.
Fee-Only, Zero Commissions
We earn zero commissions, referral fees, or compensation from plan providers. Our fee is transparent and paid by you alone. This is the only arrangement that removes the incentive to recommend a plan based on what pays us most rather than what serves your employees.
IRS Enrolled Agent on Staff
An IRS Enrolled Agent is a federally licensed tax practitioner with authority to represent taxpayers before the IRS. Having one on your advisory team means your 401(k) plan design and your broader business tax strategy are aligned — not siloed in two separate offices.
Personal and Business Finance Under One Roof
Your business 401(k) does not exist in isolation from your personal financial plan. We connect your plan design to your income, tax situation, estate plan, and retirement goals — because a business owner's finances rarely respect the line between personal and professional.
Serving Long Island Business Owners
Based in Huntington, NY and serving clients across Suffolk County and Nassau County — from Cold Spring Harbor to Amityville and beyond. We understand the cost pressures, payroll dynamics, and tax environment facing Long Island business owners specifically.
NAPFA and Garrett Planning Network Member
Membership in the National Association of Personal Financial Advisors (NAPFA) and the Garrett Planning Network requires adherence to a strict fee-only, fiduciary standard. These are not marketing badges — they are ongoing commitments with enforcement consequences.
Already have a 401(k) plan? We offer a complimentary second opinion to review your existing plan's fees, investment lineup, and fiduciary documentation. Also see our Business 401(k) service page for more on how we work with plan sponsors. And if you want to understand how our fee-only structure works, visit our fee-only advisor page.
What Our Clients Say
Selected reviews from verified Wealthtender Certified Advisor Reviews relevant to this topic — not representative of all client experiences.
Wealthtender Certified Advisor Review
"I want Amir on my side for all things finances!"
Amir has helped us set ourselves up better financially over the past 2 years than I would have ever thought possible. He's covered all the bases - retirement planning, shorter-term investments, advising us on big purchases, life insurance, estate planning, planning for our daughters, and more. Having someone who advises on both our personal and business finances means nothing falls through the cracks. What I appreciate most is that he gives us a solid, realistic plan AND still tells us when we've saved enough and should go have some fun. It's a balance I've never experienced before and it's such a breath of fresh air. He's also helped us set our daughters up well in a way that actually provides them with a nice gift without derailing our own financial future trying to pay for everything and spoiling them rotten. Amir tells it like it is and doesn't waste time sugarcoating. I especially love this when he joins calls with other experts or companies he refers us to. He doesn't just send us off on our own - he shows up, asks the hard questions, tells us when something isn't worth it, and fights to get us the best deal. He is fully on our team and isn't afraid to go toe-to-toe with someone to advocate for us.
Krista
Apr 22, 2026
Wealthtender Certified Advisor Review
"Confidence Builder"
Amir has been my financial advisor for about 2 years. He's been an incredible partner in navigating difficult situations regarding both my small business and my personal finances. Amir has given me so much confidence in my ability to control my financial future and obtain financial security. He has taught me how to build better financial habits, he has kept me accountable towards making those habits stick, and he has provided so much wisdom on how to manage my complete financial picture outside of a stock and bond portfolio. His patience and willingness to get down on my level and mold himself to my situation makes it so easy to work with him. I feel like my finances are no longer scary and I'm prepared for the future and whatever it may bring.
Maria
Jan 9, 2023
The reviews displayed above were written by current clients and are not representative of all client experiences. Reviewers received no compensation and have no material conflicts of interest unless otherwise noted. Read all reviews on Wealthtender
Common Questions
Frequently Asked Questions About Small Business 401(k) Plans
Can I set up a 401(k) for my small business?
Yes. Any business with at least one employee (including a sole proprietor with no employees other than a spouse) can establish a 401(k) plan. The plan type that makes the most sense depends on your number of employees, desired contribution levels, and how much administrative complexity you are willing to manage. A Solo 401(k) works well for self-employed individuals; a traditional 401(k) is generally appropriate for businesses with two or more employees who are not the owner.
How much does it cost to set up a 401(k) plan for a small business?
Setup costs vary widely depending on the provider and plan design. One-time setup fees may range from a few hundred dollars for bundled "off-the-shelf" plans to several thousand dollars for custom plan documents. Annual recordkeeping and administration fees typically range from approximately $500 to $5,000 or more, depending on plan size and complexity. Investment management fees (the underlying expense ratios of the funds you offer) are an additional ongoing cost. SECURE 2.0 provides tax credits of up to $5,000 per year for three years for eligible small employers establishing a new plan, which can meaningfully offset startup costs. Results vary by employer size and plan design.
Is a 401(k) worth it for a small business?
For many Long Island business owners, the answer is yes — but the right plan depends on your goals and situation. A 401(k) can allow the owner to defer significantly more income than a SEP-IRA or SIMPLE IRA, especially when combined with a Roth option or safe harbor design. It also serves as a meaningful employee benefit in a competitive hiring market. The trade-off is higher administrative complexity and cost. Working with a CRPS-credentialed advisor can help you model whether the tax savings and retention benefits justify the expense for your specific business. Results and trade-offs vary by individual situation.
Can my LLC offer a 401(k)?
Yes. LLCs can sponsor 401(k) plans regardless of whether they are taxed as a sole proprietorship, partnership, or S-corporation. The structure of the LLC affects how owner contributions are calculated (based on net self-employment income for sole proprietors and single-member LLCs, or W-2 compensation for S-corp owners), but it does not disqualify the business from offering the plan. Many Long Island LLC owners find that the way their business is structured for tax purposes significantly affects how much they can contribute — another reason to coordinate your plan design with your tax planning.
What is a safe harbor 401(k) and should I consider one?
A safe harbor 401(k) is a plan design in which the employer meets specific mandatory contribution requirements in exchange for being exempt from the IRS nondiscrimination tests (ADP and ACP tests) that apply to traditional 401(k) plans. These tests exist to prevent the plan from disproportionately benefiting highly compensated employees (like business owners). If you fail these tests, you may be required to refund contributions to owners and highly compensated employees. Safe harbor plans eliminate this risk and allow owners to maximize their own deferrals more predictably — though they require a committed level of employer contributions. Safe harbor designs are popular among small businesses and are worth evaluating with your advisor.
What is the deadline to establish a new 401(k) plan?
Under SECURE 2.0, employers can now establish a new 401(k) plan as late as the business tax filing deadline (including extensions) for the tax year in which they want the plan to be effective. For example, a calendar-year business could set up a 2026 401(k) as late as the extended 2026 return deadline in 2027. However, employee salary deferrals may only be contributed from the date the plan is established. This means waiting until year-end may limit employee contributions but still allows employer profit-sharing contributions retroactively.
Ready to Get Started?
Talk to a Long Island 401(k) Advisor Who Is Legally on Your Side
N Financial Plans is a fee-only, fiduciary advisory firm based in Huntington, NY. We hold the CRPS credential, manage 80+ qualified retirement plans, and earn zero commissions from plan providers. Schedule a no-obligation introductory call to discuss whether a small business 401(k) makes sense for your situation and what plan design might fit.
N Financial Plans, LLC. Huntington, NY. Serving business owners across Suffolk County and Nassau County, Long Island. info@nfinancialplans.com