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The SECURE 2.0 Act and Small Businesses

CU we are open sign hanging on the entrance door of a small cafe. Small business concept

A recent study by Gallup found that only 23% of employees are engaged with their work. When you are not engaged, your heart isn’t in your work—so any job might work for you.1

For a small business, a lack of employee engagement can put the company on a bad path. It can start with poor customer service and lead to higher turnover, which often results in higher costs in recruiting and training.

So, what’s the answer? Creating a sense of purpose.

Small businesses that consider employees “part of the family” prioritize the well-being, growth, and aspirations of their employees. They create a sense of purpose and belonging.

“I can do all this through Him who gives me strength.” Philippians 4:13

In addition to creating that intangible sense of belonging, small businesses can also consider enhancing comp packages with retirement plans thanks to new startup tax credits that were included in the SECURE 2.0 Act of 2022.2

Here’s a quick summary of the two key features:

The new law increases the three-year, start-up tax credits to 100% of startup costs for plans with up to 50 employees. Previously, employers with fewer than 100 employees were eligible for a tax credit of up to 50% of administration costs. That could mean a total of $15,000 in tax credits by year three. If the business adds automatic enrollment, another $1,500 tax credit may be available over the three years.3

The law offers a tax credit for employer matching or profit-sharing contributions for the first five years of the plan. The credit could look like this:3

  • 100% of employer contributions for the first two years after the plan is initiated.
  • 75% in year three.
  • 50% in year four.
  • 25% in year five.

We’re not tax experts, but the good news is that we are associated with companies that are. If you want to learn more about the tax credits for creating a retirement plan, we encourage you to speak with your tax professional or ask our tax planning department. They might be able to help.

If you started a retirement plan years ago, and now want to learn more about whether the SECURE 2.0 Act has features you can use, we encourage you to contact us so we can help you get the ball rolling.

  1. LinkedIn.com, June 18, 2024
  2. ADP.com, 2024
  3. CapitalGroup.com, 2024

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