In the twilight of 2019, President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act that took effect January 1, 2020. So, how will your business benefit from the SECURE Act?
At its core, the SECURE Act means to encourage increased retirement savings. And it provides a number of paths for individuals to do so. It has pushed back timelines for contribution and required distributions. Now, part-time employees can participate in employer 401(k) plans if they meet certain stipulations. And it includes a host of other enhanced saving opportunities.
Small Business Retirement Plan Tax Credits
While the majority of Americans save for retirement through a work-based plan, employees at small businesses largely could not. Nearly 75 percent of workers at companies with fewer than 100 employees could participate in an employer plan in 2017. Small business owners have rightfully cited startup costs and administrative burdens as hurdles to offering plans.
To address these issues, one less publicized provision of the SECURE Act is a massive increase in the small business tax credit. This credit covers the costs of the first three years an employer offers a workplace retirement plan. Originally, the tax credit covered $500 a year for up to three years. However, the new provision now allows up to $5,000 a year (for a total of up to $15,000 over three years). There are also increased credits available for employers who require their workers to automatically enroll in their company’s retirement plans.
Multiple Employer Plans for Retirement
Perhaps most importantly though, a part of the SECURE Act now allows small business owners the ability to band together to create Multiple Employer Plans (MEPs). MEPs pool small business resources to offer workplace retirement plans easier to administer. They are also more cost effective for their owners. This also includes an annuity option for existing retirement plans, which previously could only be taken as a lump sum for taxation purposes.
Why does this matter? If you want to attract the highest quality employees for your open positions, you must offer plans that increase the allure of working for you. A 2019 study by the Society for Human Resource Management, ranked retirement benefits second in importance (after health care). This accounted for all the benefits that employers offer.
The new law comes with a variety of updates and procedures. We can help you realign your business practices today to start capitalizing on its benefits. Whether you’re a small business owner or an employee contributing to a work-based plan, we can help.
Want to learn more on how these and other portions of the SECURE Act affect your taxes? Contact our office at 724-216-5180 or use our online form to schedule a consultation.