The Setting Every Community Up for Retirement Enhancement (SECURE) Act delivers some impressive features for small businesses and their employees moving forward. If you fall into either category, here’s what you need to know about how the act affects you.
If you are a small business owner, the SECURE Act allows you to:
Offer benefits for part-time employees
This is especially exciting for the part-timer who has—until now—been unable to get the same benefits, if any, that many full-timers enjoy. Under the SECURE Act, part-time employees who meet the requirements are now able to participate in their employers’ retirement plans. What are those requirements? Employees who have worked at least 1000 for the employer in one year are eligible. And those who’ve completed at least 500 hours over three consecutive years are eligible if the employer makes that allowance.
Get tax credits for offering plans and automatic enrollment
How would you like to receive up to $5,000 in tax credits for offering a 401(k) to your employees? Provided you meet certain requirements, you can do so for up three years. The idea behind this tax credit is to help offset the cost involved in offering a retirement plan. But the biggest bonus is that you can potentially attract more qualified employees who may stay with you longer because you offer these benefits. As you know, employer-sponsored plans are hard to come by these days, especially for the average blue-collar worker. But, hey, even white-collar small businesses can celebrate this provision and the opportunity to hire and retain full and part-time help.
Plus, you can get an extra $500 for automatic enrollment in 401(k) and SIMPLE IRAs. Your employees can opt out if they don’t want to participate.
Retain your older, most experienced employees
The SECURE Act making it more cost effective to offer retirement plan benefits is a victory for small businesses. But another feature that the act implements can also positively impact your business. The age to contribute to traditional IRAs has been raised. Before, once a person reached the age of 70 ½, they were unable to continue making contributions. Now, they can make those traditional IRA contributions after age 70 ½ as long as they have earned income. It’s a fact that more people are continuing to work past retirement age. But this offers an extra incentive to do so to increase the bottom line of their retirement savings.
Ability to join other employers in pooled employer plans (PEPs)
The rules for this have yet to be fully determined, and PEPs under the SECURE Act won’t begin until January 2021. But, once implemented, unrelated small businesses will be able to join pooled employer plans. This will provide a cost-effective way for employers to offer employees excellent retirement benefits.
As you can see, small businesses gain potential big benefits from these elements of the SECURE Act. Consult a trusted tax professional or attorney to learn exactly how the new law affects you and your business.
This article was written for information purposes only and should not be considered as tax, financial, or legal advice.