Washington Saves vs. a 401(k): which is better for your business?
By Dustin Metcalf, CRPC® · Updated October 7, 2026
Side-by-side comparison (2026)
| Washington Saves | 401(k) | |
|---|---|---|
| Type of account | Each employee's own Roth IRA (state auto-IRA) | Employer-sponsored plan; pre-tax and Roth options |
| Cost to the business | No program fees | Setup and admin fees vary by provider; credits can offset them |
| Employee limit | $7,500 (+$1,100 age 50+) | $24,500 (+$8,000 age 50+; $11,250 ages 60–63) |
| Employer match or contribution | Not allowed | Optional or required, depending on design |
| Most the owner can put away | Same IRA limit as everyone; Roth income limits apply | Up to $72,000 total per person, plus catch-up |
| Income limits | Roth IRA limits apply (2026 phase-out: $153,000–$168,000 single, $242,000–$252,000 joint) | None for contributing |
| Employer fiduciary role | None | Yes, can be shared or reduced with a pooled plan or 3(16)/3(38) providers |
| Federal startup tax credits | No | Yes, for eligible businesses with up to 100 employees |
| Employer work | Register, keep employee list current, send deductions within 7 business days | Payroll deductions, annual testing and filings (often handled by the provider) |
When Washington Saves can be the better fit
- You want to meet the requirement with no cost and no fiduciary responsibility.
- You don't plan to contribute for employees, and you're not looking to save much for yourself through the business.
- Your margins or turnover make a sponsored plan hard to justify right now.
When a 401(k) can be the better fit
- You want to save more yourself. Owners often earn too much for a Roth IRA, and even when eligible, $7,500 a year is a small fraction of what a 401(k) allows.
- You want to offer a real benefit. A match is one of the benefits employees notice most, and Washington Saves can't offer one.
- The credits change the math. If you have 50 or fewer employees, federal credits can cover up to 100% of eligible startup and admin costs, up to $5,000 a year, for the plan's first three years. See how the credits work.
A note on new 401(k) plans
Under SECURE 2.0, most 401(k) plans started after December 29, 2022 must automatically enroll employees (starting at 3% to 10% of pay and increasing each year). Businesses with 10 or fewer employees and businesses less than three years old are exempt from that requirement. Automatic enrollment can also qualify you for an extra $500-a-year credit.
Other plans that also meet the requirement
A 401(k) isn't the only alternative. A SEP IRA can be simple and employer-funded, and a SIMPLE IRA sits between Washington Saves and a 401(k) on cost and flexibility. Compare SEP, SIMPLE IRA and 401(k).
Frequently asked questions
Is Washington Saves better than a 401(k)?
It depends on your goals. Washington Saves is free for employers and simple, but caps savings at the IRA limit and doesn't allow employer contributions. A 401(k) costs more to run but allows much higher savings, employer matching and federal startup tax credits.
Can I offer a 401(k) instead of Washington Saves?
Yes. Offering a 401(k), SIMPLE IRA, SEP IRA or similar qualified plan exempts your business from Washington Saves.
Can I have both Washington Saves and a 401(k)?
No. Businesses that offer a qualified retirement plan are exempt from Washington Saves, so a business with a 401(k) wouldn't register for the program.
How much does a 401(k) cost a small business?
Costs vary by provider and plan design, often a setup fee plus annual administration fees. For eligible businesses with 50 or fewer employees, the SECURE 2.0 startup credit can cover 100% of eligible costs, up to $5,000 a year, for three years.
Want this worked out for your business?
Book a free intro call with Dustin. We'll compare Washington Saves with a plan of your own, including estimated cost after tax credits and what you could save for yourself. If Washington Saves is the best fit, we'll tell you.