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Attention Small Business Owners – BIGGER Tax Credits for New Small Business Retirement Plans Cannot Be Ignored!

The SECURE (Setting Every Community Up for Retirement Enhancement) Act passed into law in December 2019 made meaningful improvements to retirement plans to boost retirement readiness in the U.S.   There were several different types of changes in this regard, and for employers who do not have a company retirement plan yet, this Act helps to make it easier for a small business to offer a plan to their employees.  Here is a simple summary of existing and new tax credits.

The original tax credit from 2001 was 50% of start-up costs up to $500 per year for three years (total of $1,500).  The credit can be carried back one year or forward 20 years.

Eligibility Requirements:

  1. 100 or fewer employees who received at least $5,000 in compensation in the prior year
  2. At least one Non-Highly Compensated Employee plan participant (defined as under $120,000 in income)
  3. No employees received benefits from a prior plan in past three years before you take tax credit

The 2019 SECURE Act expands the tax credit to $250 per Non-Highly Compensated Employee up to $5,000 for three years.  This is up to a $15,000 maximum compared to the earlier $1,500 amount.

There is yet another tax credit in the SECURE Act.  Small business employers who add automatic enrollment receive a $500 credit for three years, for an additional total of $1,500.

All told, this brings the total tax credit to a possible $16,500 over three years, which goes a tremendous way to offsetting plan costs.

Learn more about easy, affordable small business 401(k) plans by visiting www.Shelton401K.com, email me or schedule call.

Shelton Capital Management does not provide accounting or tax advice to its clients. All clients should be aware that tax treatment is subject to change by law, in the future or retroactively, and clients should consult with their tax advisors regarding any potential strategy, investment or transaction.

Author

  • Josh Fudge joined Shelton Capital Management in 2019.  He is a member of the Advisory Services Team with a focused responsibility on sales and marketing initiatives.

    Prior to joining Shelton Capital Management, Josh held various roles in the investment industry most recently with RBC Wealth Management where he was responsible for investment analysis and client growth. The majority of Josh’s career has been focused on sales and distribution as a Director with WHV Investments, a VP at SteelPath/OppenheimerFunds, and various positions at Janus Capital Group. Away from work he enjoys skiing, hiking, and spending time outdoors with his wife, three children, and their dog Bailey.

    Josh is a graduate of Miami University (Oxford, OH).

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