Ready, Set, Retire: Exciting News For Small Business Retirement Plans

The topic of retirement is constantly on our minds, but as small business owners, offering a strong retirement plan for your employees can be confusing. Recently, changes in legislation are allowing businesses and their employees to capitalize on added incentives related to their retirement plans. So when the time comes, you'll have enough money to sit back and enjoy a frozen cocktail on the beach without worrying about how to fund your retirement. 

Secure Act 2.0

On December 29, 2022, the SECURE Act 2.0 was signed into law. Originally known as the Securing A Strong Retirement Act, it received overwhelming bipartisan support. Imagine?! The current act plans to address the retirement crisis in the US by helping small businesses support their employees' retirement plans. 

Your Potential Eligibility

This act plans to increase eligibility for small businesses to earn tax credits. Businesses with 50 or fewer employees can qualify for a credit equal to 100 percent of the administrative costs for establishing a workplace retirement plan. This means more money in your pocket and the ability to offer competitive retirement plans for your employees. Before this change, only 50 percent of the cost was being recuperated to small businesses, often making it financially challenging. 

Additionally, new credit will be available for employer contribution costs. Businesses with up to 100 employees may be entitled to these tax credits based on their employee matching or profit-sharing contributions. This means if you are helping your employees save for retirement, the government wants to help you. This credit, which caps at $1,000 per employee, will phase down gradually over five years but will line your wallet while you do right by your employees.

If your business is offering a retirement plan for the first time by joining a multiple employer plan or a pooled employer plan, consult an accountant to see if you are eligible for a startup credit. Don’t have an accountant? We happen to know a couple great ones and are happy to help!

Be Aware

One important thing to note about this act is that it expands auto-enrollment to make it easier for employees to participate in retirement savings plans. It will require automatic enrollment for new 401(k) or 403(b) plans, but employees can opt-out. Exceptions to this expansion include small businesses with ten or fewer employees, businesses that are less than three years old, churches, and governmental plans. 

If your business is expanding its retirement plans or offering retirement plans for the first time, reach out to us about any questions you may have about this act and how it will affect your business.