SECURE Act 2.0 is a legislation designed to enhance retirement security amid the changing landscape of retirement savings in the United States. One of the key components of the act is to encourage employer participation in retirement planning.

This legislation incentivizes small businesses to offer retirement plans to their employees by providing tax benefits and simplifying administrative requirements. By doing so, it aims to expand retirement savings opportunities and ensure more workers have access to employer-sponsored retirement plans.

The SECURE Act 2.0 aims to incentivize and facilitate small business employers’ participation in retirement planning for their employees. There are a variety of ways to take advantage of these tax credits while offering a competitive benefit and supporting your employees’ financial future.

1. Establish a Retirement Savings Program. Small businesses can claim up to 100% of the expenses associated with start-up and administrative costs for the first three years. The provisions call for tax credits up to the greater of $500 or $250 per eligible employee. 

2. Offer an Employer Match. When you match employee contributions to their plan, their portfolio grows and so do your tax credits. Claim up to $1,000 per employee for your contributions made to their plans.

3. Collect Contributions Through Automatic Enrollment. New plans will be required to automatically enroll employees at a rate of at least 3% starting in 2025. Choosing a 401k plan that’s integrated with your payroll platform can streamline this process.

The SECURE Act 2.0 amplifies the tax credits available to eligible small businesses, making the initiation of 401(k) plans more financially attractive. Under this new legislation, the tax credit for startup costs has been significantly increased, enabling small businesses to recoup a larger portion of the costs associated with setting up new retirement plans.

The SECURE Act 2.0 makes it more affordable to invest in the long-term financial stability of your business and your employees.
• Tax Credit Amount - The tax credit now covers up to $5,000 in annual startup costs incurred during the first three years of the plan.
• Eligibility - Small businesses with up to 100 employees who earn at least $5,000 are eligible for this credit. The credit is particularly aimed at businesses that have not had a retirement plan.
• Ease of Claiming - Claiming the credit has been simplified to encourage more small businesses to take advantage of this incentive. Simply file Form 8881 with the IRS.

Tax Advantages for Contributions
For employer contributions, the SECURE 2.0 Act takes the tax advantages a step further. Businesses with 50 or fewer employees can claim a credit for the employer contribution for the first five tax years starting when the plan is initiated, up to $1,000 per employee. 
Your business can claim 100% of the employer contribution in the first and second tax years. Then, claim 75% in the third year, 50% in the fourth year, and 25% in the fifth year. For employers with 51 to 100 employees, the credit is slightly reduced.