Retirement Savings Opportunities
The SECURE Act 2.0, enacted in December 2022, introduced several tax credits aimed at enhancing retirement savings opportunities for both individuals and small businesses. Here’s an overview of the key tax credits:
Tax Credits for Small Businesses
- Start-Up Credit for Retirement Plans
- Eligibility: Employers with up to 100 employees who establish a new retirement plan.
- Credit Amount:
- Employers with 1–50 employees: 100% of administrative costs, up to $5,000 per year for the first three years.
- Employers with 51–100 employees: 50% of administrative costs, up to $5,000 per year for the first three years.
- Additional Notes: The credit is available only if the employer has at least one non-highly compensated eligible participant.
- Employer Contribution Credit
- Eligibility: Employers with up to 100 employees who make matching or nonelective contributions to a new retirement plan.
- Credit Amount:
- Year 1–2: 100% of employer contributions, up to $1,000 per employee.
- Year 3: 75% of employer contributions.
- Year 4: 50% of employer contributions.
- Year 5: 25% of employer contributions.
- Additional Notes: Employees earning over $100,000 are not considered for this credit.
- Automatic Enrollment Credit
- Eligibility: Employers who add automatic enrollment to their retirement plans.
- Credit Amount: $500 per year for three years.
- Purpose: Encourages higher participation rates in employer-sponsored plans.
