SECURE 2.0 incentives: Tax credits for startup retirement plans

People are more likely to save for retirement when they have access to an employer-sponsored plan, but many companies simply don’t offer retirement plans to employees.
Under SECURE 2.0, there are new rules not only encouraging workers to enroll in company plans – but also tax credits being given to companies to start retirement plans.
SECURE 2.0 increased the maximum tax credit allowed for setting up a new retirement plan – and tax credits are a pretty good incentive for companies.
Under SECURE 2.0, employers who are eligible could potentially claim a tax credit of up to $5,000 for three years for the cost of starting an SEP, a SIMPLE IRA or a qualified plan – including a 401(k).
There are also two direct federal income tax reduction credits. One is a 2023 dollar-for-dollar tax credit for employer contributions made to any qualifying start up plan with 100 or fewer employees – although it does phase out for those with more than 50 employees.
Also, there is a three-year enhanced tax credit for employer costs to establish or administer an eligible employers plan with 50 or fewer employees.
Generally speaking, these new tax credits are available to companies without a qualified employer plan in place for three immediately preceding years.
In a nutshell, a company can get the tax credit if it has at least 50 employees in 2023 but didn’t have a 401(k), a defined benefit plan, a Simple or SEP, or a pension plan in 2020, 2021 or 2022.
There are other rules and considerations, so it’s a good idea to talk to a qualified retirement planning advisor to see if your business qualifies.
Do you still have questions about retirement planning options?
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If you have other questions about retirement plan loans, email us or call 937.308.0758.