As a small business owner, you know the challenges surrounding providing retirement plans to your employees. The costs to establish and maintain these programs can significantly impact your bottom line, making it difficult or impossible to offer competitive benefits that would help you retain top talent.
Fortunately, new legislation that has been recently passed by Congress makes it easier than ever for small business owners to start a small business retirement plan for their employees.
Let’s break it down.
SECURE Act 2.0: An Overhaul of Retirement Plan Coverage
On December 29, 2022, President Biden signed the Consolidated Appropriations Act of 2023 (H.R. 2617) into law. Included in this larger bill is the Securing a Strong Retirement Act, commonly called SECURE Act 2.0, which overhauls the rules surrounding retirement coverage, savings, and plans.
SECURE Act 2.0 offers several benefits to retirees, those saving for retirement, and small business owners. Some of these benefits include the following:
- Raises the starting age for required minimum distributions
- Simplifies access to retirement savings
- Helps encourage employees to save for retirement
- Lowers employers’ costs of starting and funding retirement savings plans
- Provides new and additional tax credits for small business offering plans
- Makes it easier for older workers to save more
- Encourages automatic enrollment
- Increases catch-up contributions
This package of laws is primarily intended to help people boost their retirement savings.
Tax Credits for Small Businesses Make It Easier to Offer Retirement Plans
To make it easier for small businesses to start and fund retirement plans for their employees, SECURE Act 2.0 offers enhanced tax credits to offset administrative costs. If your small business has between 1 and 50 employees, you can receive credit that covers 100% of administrative expenses, up to $5,000, for the first three years. In other words, for small businesses with less than 50 employees, you can get up to $15,000 in tax credits over the first three years to offset the setup costs of maintaining new 401(k) plans for your employees.
In addition to these tax credits, SECURE Act 2.0 allows small business employers to access tax credits equal to the amount of contributions they have made to retirement plans on behalf of their non-highly compensated employees (those making under $100,000 per year), up to $1,000 per employee. This credit decreases by 25% per year over three years.
Similar credits at a lower amount are available in both cases to businesses with 51 to 100 employees.
Taken together, the tax credits established by this new legislation make it easier for small businesses to start a new retirement plan, improve their benefits packages, and stay competitive when it comes to securing top talent.
How Your Small Business Can Take Advantage of Retirement Plan Tax Credits
While some of the changes described in SECURE Act 2.0 will apply over the next few years, many are effective immediately. Your small business can take advantage of these tax credits to affordably offer retirement benefits to your employees.
To determine if your company is eligible for tax credits under this legislation, we recommend contacting an accounting firm that specializes in small business accounting. Professional accountants will be able to identify your options and create a plan for your business to start saving money.
Contact the Experienced Accountants at
If you want further guidance on this new law or how to claim tax credits from the SECURE Act 2.0, we would be happy to answer your questions and walk you through the process.
At Fisher, P.A., our team of experienced accounting professionals can help you determine how these new rules impact your small business and establish the next steps to maximize your benefits. We serve businesses throughout North Carolina and the Southeast. Our skilled team is here to lift the burden of accounting from your shoulders so you can get back to doing what you do best: running your business.
Call us at 704.332.7800 or fill out our contact form today to schedule a consultation.