The SECURE Act 2.0: A Game-Changer for Small Businesses

In the constantly shifting landscape of small business laws and legislation, it’s critical to stay updated on major legislative changes that can impact you. One such change is the SECURE Act 2.0, an upgrade to the original SECURE Act, which provides more retirement plan flexibility and benefits to small businesses and their employees.

What is the SECURE Act 2.0?

The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 was signed into law on December 29, 2022. The original SECURE Act, passed in 2019, made significant changes to retirement savings and tax laws. Its successor, the SECURE Act 2.0, aims to build upon these changes and further improve retirement security for all Americans.

How Does the SECURE Act 2.0 Benefit Small Businesses?

The SECURE Act 2.0 offers numerous benefits to small businesses, specifically in the realm of retirement plans. It provides more choices and flexibility, enabling businesses to tailor retirement plans to their unique needs and those of their employees.

For example, the Act allows small businesses to join multiple employer plans (MEPs), which were previously only available to larger corporations. This gives small businesses access to lower-cost, higher-quality retirement plans, helping them compete with larger companies in attracting and retaining talent.

Key Provisions Impacting Small Businesses

One of the standout provisions of the SECURE Act 2.0 is the increase in tax credits for small businesses that cover certain employees in their retirement plans. The Act increases the maximum tax credit from $500 to $5,000, providing a substantial financial incentive for small businesses to set up and maintain retirement plans for their employees. That means small businesses that start a new 401(k) could qualify for up to $16,500 in tax incentives. Here are some other Highlights:

Doubles tax credits for new plans: For small businesses with up to 50 employees, SECURE Act 2.0 increases the existing tax credit to 100% of plan start-up costs, capped annually at $5,000 per employer for each of the first three years.

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.

Maintains tax credit for using auto-enrollment: The tax credit of $500 per year for the first three years of electing auto-enrollment is still available.

Real-World Examples

Consider a small tech start-up that wants to attract top talent but struggles to compete with larger companies’ comprehensive benefits packages. By taking advantage of the SECURE Act 2.0 and joining a MEP, this start-up can offer a competitive retirement plan, making it more appealing to potential employees.

Or take a small bakery that wants to show appreciation for its long-time employees by helping them save for retirement. With the increased tax credit, this bakery could set up a retirement plan and cover more of its employees without breaking the bank.

Embrace the Benefits of the SECURE Act 2.0

The SECURE Act 2.0 offers an array of benefits to small businesses, from increased flexibility in retirement plans to generous tax credits. As a small business owner, it’s time to seize these opportunities and enhance your retirement offerings.

Remember, a strong retirement plan can help attract and retain top talent, improve employee satisfaction, and even provide tax benefits. Should you need help finding a 401k administrator, we’re happy to suggest some.