Planning for retirement is a top-of-mind priority for many American workers but saving can be difficult when there is no set plan in place between the individual and employer. However, at the end of 2019, a significant step in the right direction was taken to assist with the retirement crisis with the passing of the Setting Every Community Up for Retirement (SECURE) Act.
What is the SECURE Act and how will it benefit your business and employees? Let's investigate:
Understanding the Benefits of the SECURE Act
The SECURE Act was designed to aid Americans' ability to save for their retirement while also simplifying the retirement plan process—allowing more small businesses to provide plans to their employees. This act means that small business owners can become more competitive at attracting and retaining talent for their positions. When candidates search for new positions, an employer-sponsored retirement plan is among the top benefits they seek, so not only does a 401(k) plan make an employer appealing to new talent but will also keep current employees engaged.
For many small businesses launching a 401(k) may come with a financial burden, but the SECURE Act may be the answer. Let's take a look at the benefits small business owners can take advantage of under this new law:
1. Tax Credits for Establishing New Plans
Previously, small business owners only received a one-time tax credit of $500 for creating new plans but this has been increased and now the credit can be up to $5000. Additionally, this tax credit is for the first 3 years of the plan, not just a one-time credit. This means that small business owners can receive up to $5000 ($15,000 in total) for the first three years the plan is in place.
2. Tax Credits for Establishing Automatic Enrollment Plans
Similar to establishing new plans, small business owners can receive a tax credit of $500 when they add automatic enrollment features to their newly established or existing 401(k) plans. This credit is also available for three years and begins when automatic enrollment is included.
3. Creation of Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
Beginning January 1, 2021, small businesses can enter a plan with other businesses without being related to one another. This addition also eliminates the IRS rule that all MEP participants will face consequences if one employer falls out of compliance.
When it comes to the world of retirement plans, it can be a jumbled mess—especially if you are just starting out. Investing in retirement for your employees is beneficial and doesn't have to be a financial burden, especially with the advantages the SECURE Act offers. If your small business is interested in exploring retirement plan options, let RPCSI, the experts in retirement, be your guide.