On Dec. 29, 2022, the federal Setting Every Community Up for Retirement Enhancement Act 2.0 of 2022 (SECURE 2.0) was signed into law. The act contains more than 90 provisions designed to strengthen the retirement system, including several changes to employer-sponsored retirement plans. The effective dates of the provisions vary, with some taking effect immediately and others in several years.
Below are some of the provisions which affect business owners. For a full list of what’s covered in the SECURE 2.0 act, please visit this link by clicking here.
Beginning in 2023, business owners with 50 or fewer employees who incorporate new plans may take advantage of a tax credit for start-up costs (sustained in the first three years) of up to 100 percent (capped at $5,000).
In addition in 2023, a new credit of up to $1,000 per worker is available to certain employers for employer contributions to start-up plan.
One of the provisions of the act requires that business owners who adopt new 401 (k) and 403 (b) plans automatically enroll eligible employees, starting at a contribution rate of 3 percent.
In addition, retirement plan service providers would also be required to offer automatic portability services to employees who change jobs. This option automatically transfers an employee’s retirement account balance to a new plan if they leave one job for another.
In 2024, part-time employees who have at lest 500 hours of service in three consecutive years and are 21 years of age and older must be eligible to contribute to a 401 (k) plan if one exists at the businesses. In 2025, part-time employees who are 21 and older and who have at least 500 hours of service in two consecutive years must be eligible to contribute to either the company’s 401(k) or 403 (b) plans.
Employer retirement plans would have the option to add an emergency savings account that allows participants to save up to $2,500 for emergency expenses. This gives employees penalty-free access to funds, and depending upon the plan, contributions may be eligible for an employer match.
Businesses with less than 100 employees may be eligible for a non-refundable tax credit for up to three years by offering optional benefits for military spouses. To qualify for a maximum credit of up to $500 per military spouse, he or she must be eligible to participate and receive employer contributions within two months of hire.
Business owners or individuals with questions about the SECURE 2.0 act may call the attorneys at O’Reilly Rancilio for assistance at 586-726-1000 or by visiting our website at www.orlaw.com.
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