The SECURE 2.0 Act contains more than 90 provisions designed to enhance retirement savings opportunities and expand access to employer-sponsored retirement plans. While the law was enacted on December 29, 2022, general consensus amongst practitioners is that many of these provisions have not yet been widely adopted.
In our three-part series, we’ll explore key provisions and practical strategies to help employers make the most of the opportunities available under the SECURE 2.0 Act. Each installment focuses on a specific area: employers of younger and/or lower-income workers, nonprofit organizations, and finally, small businesses.
Last Up: Secure 2.0 Provisions Impacting Small Businesses
If you are a small employer considering establishing a retirement plan—or if you already sponsor one—make sure you are taking advantage of the tax credits available under the SECURE 2.0 Act. These incentives are designed to help offset both the startup costs and the ongoing contributions associated with offering a retirement plan.
Three Year Small Business Startup Credit
- Provides up to $5,000 per year for the first three years to cover qualified startup and administrative costs, including plan set up fees, payroll integration, employee education, etc.
- Employers with 1–50 employees may receive a credit equal to 100% of eligible costs, up to the $5,000 cap.
- Employers with 51–100 employees may receive a credit equal to 50% of eligible costs, up to the $5,000 cap.
Employers that Join an Existing Plan
The startup credit is also available to employers that join an existing Multiple Employer Plan (MEP), regardless of how long the MEP has been in existence.
Employer Contribution Credit
- For contributions made to a defined contribution plan, SEP or SIMPLE IRA plan.
- Provides a credit of up to $1,000 per employee per year for employer contributions.
- Available for 5 years with the credit percentages decreasing over time:
- Year 1-2 100%, Year 3 75%, Year 4 50%, Year 5 25%
- The credit phases out gradually for employers with 51-100 employees
Auto-Enrollment Credit
- Employers may receive a $500 credit per year for three years, beginning with the first taxable year that includes the feature, for adding an automatic enrollment feature to their retirement plan.
These incentives can significantly reduce the cost of establishing and maintaining a retirement plan, making it easier for small businesses to provide employees with meaningful retirement savings opportunities.
We’re here to help. If you have questions on plan design, want a compliance checkup for your plan, or need guidance on tax implications for your business or plan participants, our experienced employee benefit plan advisory team is here to assist.
