The Setting Every Community Up for Retirement Enhancement Act was initially passed and signed into law in December 2019. The bill addresses several changes our country needs to support our long-term retirement system. Unfortunately, it didn’t provide enough solutions for most working Americans and small business owners to participate. In 2022, Congress reviewed and approved SECURE 2.0, which expands upon the original Act and offers small businesses the tax credit needed to encourage employee retirement planning.
SECURE 2.0 addresses the retirement savings gap by introducing several significant changes for small businesses, particularly:
- Increasing savings limits toward retirement plans;
- Providing small businesses incentives to offer retirement plans; and
- Giving citizens 60+ more flexibility toward how they save.
Small Business Tax Incentives for Retirement Planning
SECURE 2.0 created additional tax benefits for small businesses with under 50 employees. Here are a few.
Doubles tax credits for new plans: For small businesses with up to 50 employees, SECURE Act 2.0 increase the existing tax credit to 100% of plan start-up costs (up from 50%), capped annually at $5,000 per employer (which remains unchanged) for each of the first three years – up to $15,000.
Expands eligibility for the start-up tax credit: Legislation also extends start-up tax credits to employers based on the year employers join existing multiple employer plans, rather than only if they join new plans.
Adds new credits for employer contributions: Small businesses with up to 50 employees will receive a new tax credit based on a percentage of employer contributions, up to $1,000 per employee for employees making less than $100,000 in the prior year – with some exclusions.
Are you ready for SECURE Act 2.0?
Tax Time CPAs partners with Human Interest for our own 401K planning. They work with hundreds of payroll providers and offer upfront, fixed-pricing solutions without hidden fees. If you are looking for a retirement plan provider for your small business, we suggest contacting them for more information. Otherwise, check out this article by Human Interest, as it takes a deep dive into small business owners’ options for full-time and part-time employee retirement plans.
If you are curious about the impacts SECURE 2.0 will have on your small business tax credits, call us. We are always here and happy to help. Call or schedule a Discovery Call with a time that works for you. We can walk you through how the SECURE 2.0 Act will impact you and your small Colorado business.
Contact Human Interest for more information about their employee-assisted retirement plans.