How SECURE Act 2.0 Tax Credits Can Help Small Businesses Offer Retirement Benefits

Introduction

Small businesses often face challenges when it comes to offering competitive retirement benefits. The SECURE Act 2.0 introduces powerful tax credits that make it easier and more affordable for small employers to establish retirement plans, leveling the playing field with larger organizations. If you’re searching for “business retirement plan advisors near me”, understanding these credits is the first step toward building a stronger benefits package for your team.

The SECURE Act 2.0 is a federal law designed to expand access to retirement savings plans, particularly for small businesses. It builds on the original SECURE Act by increasing and enhancing tax incentives for employers who start new retirement plans or improve existing ones.

1. Startup Cost Tax Credit

• 100% Credit for Small Employers: If your business has up to 50 employees, you can claim a tax credit covering 100% of qualified startup costs, up to $5,000 per year, for three years. This means you could receive up to $15,000 in total credits over three years.
• 50% Credit for Larger Small Businesses: Businesses with 51–100 employees qualify for a 50% credit, also capped at $5,000 per year for three years.
• Qualified Costs: These include ordinary and necessary expenses to set up, administer, and educate employees about the plan.

2. Employer Contribution Credit

• Additional Credit for Contributions: Small businesses can also claim a credit for employer contributions made to employees’ retirement accounts, up to $1,000 per eligible employee per year, phased out gradually over five years.
• Eligibility: Applies to employees earning less than $100,000 annually (adjusted for inflation).

3. Automatic Enrollment Credit

• $500 Credit: If you add an automatic enrollment feature to a new or existing 401(k) plan, you may qualify for an additional $500 tax credit per year for three years.

To be eligible for these credits, your business must:

• Have 100 or fewer employees who earned at least $5,000 in the previous year.
• Not have offered a similar retirement plan covering substantially the same employees in the past three years.
• Cover at least one non-highly compensated employee (NHCE) with your plan.

• Use online calculators or consult with business retirement plan advisors near you to estimate your potential tax credits based on your business size and plan features.
• Credits can be claimed for up to three years, and in some cases, even if the plan’s first year is not the current tax year.

Partnering with experienced business retirement plan advisors ensures you:

• Maximize your available tax credits.

• Choose the right plan for your business and employees.

• Stay compliant with IRS and Department of Labor requirements.

• Receive ongoing support for plan administration and employee education.

The SECURE Act 2.0 makes it more affordable than ever for small businesses to offer retirement benefits, thanks to expanded tax credits for startup costs, employer contributions, and automatic enrollment features. If you’re ready to take advantage of these incentives, connect with business retirement plan advisors at Target Retirement Solutions to start building a brighter financial future for your team.