Discover how the SECURE Act 2.0 can revolutionize your retirement savings strategy. SECURE Act 2.0 contains provisions that aim to expand access to retirement plans, increase employee savings opportunities, and streamline the administration of employer-sponsored retirement plans, including 401k plans.
Employer Tax Credits
In the original SECURE Act, for businesses with 51-100 employees, the first credit year (the year when the plan is established) and each of the 2 taxable years immediately following the first credit year, the tax credit available is the greater of $500, or the lesser of $250 for each non-highly compensated employee (NHCE) who is eligible to participate in the plan, or $5,000.
Examples:
Company with 1 eligible NHCE – 1 x $250 = $250 but get the $500 tax credit
Company with 5 eligible NHCE’s – 5 x $250 = $1,250 credit
Company with 10 eligible NHCE’s – 10 x $250 = $2,500 credit
Company with 20 or more eligible NHCE’s – 20 X $250 = $5,000 credit
The tax credit is only available when an employer establishes a new retirement plan, including 401(k) Plans. If the employer offered a retirement plan at any time during the previous three years, which covered substantially the same employees as the new plan, the tax credit is not available.
The tax credit is not a deduction. The tax credit reduces the employer’s tax liability dollar-for-dollar. If this tax credit is calculated to equal $2,000, then the employer’s tax liability is reduced by $2,000.
With the updated SECURE Act legislation, an available tax incentive allows eligible businesses with 50 or fewer employees to receive a tax credit covering 100% of their administrative expenses when setting up a workplace retirement plan. This benefit is applicable for a maximum period of three years.
To connect on more details on 401K please visit – Six Reasons the ESI Multiple Employer Plan (MEP) 401K Gives You Peace of Mind – eEmployers Solutions, Inc. (eesipeo.com)
