How To Use Tax Credits To Secure The Right Retirement Plan For Your Business

Accelerate Your Company’s Retirement Plan Strategy

The new SECURE Act offers owners additional opportunities to save when starting up a retirement plan in their business, which makes starting up a plan now more advantageous than ever before.

Take a look at the two key tax credits that are available to employers who take advantage of this opportunity today. We’ve also put together this information in a printable format. Feel free to refer to it as necessary.

Retirement Plan Startup Costs Tax Credit

Before the SECURE Act went into effect, the Retirement Plans Startup Costs Tax Credit allowed businesses to receive a tax credit of up to 50 percent of startup costs, up to $500 per year for three years. While this was already a great opportunity for businesses because it resulted in a savings of $1,500 in tax credits for plan startups, the introduction of the SECURE Act takes the Retirement Plan Startup Costs Tax Credit to the next level and allows the business owner a chance to claim up to $15,000.

Your Retirement Plan Startup Costs Tax Credit under the SECURE Act would be limited to the greater of these two options:

  • $500; or
  • the lesser of $5,000 or $250 multiplied by the amount of non-highly compensated eligible plan employees of employers.

Because the credit still applies for three years, rather than having a shot at a maximum of $1,500 in tax credits, you could potentially receive up to $15,000, which could potentially offset all of your startup expenses including administration, set up, and employee education.

Automatic Enrollment Tax Credit

The SECURE Act also created a new tax credit for employers who start 401(K) plans that include automatic enrollment. The Automatic Enrollment Tax Credit equals up to $500 per year for three years, adding a possible additional $1,500 in tax credits.

If you would like to learn more about the SECURE Act, or how you can take advantage of these tax credit opportunities today, contact Rea & Associates’ retirement plan services team for a free consultation.

By Steve Renner, QKA (New Philadelphia office)

Looking for more information about the benefits of the SECURE Act and whether now is a good time for your business to start a retirement plan? Check out these resources:

[ARTICLE] The Best Tax Deferral Opportunity Is A Retirement Plan

[ARTICLE] SECURE Act Ushers In Substantial Retirement Plan Changes

[PODCAST] How The SECURE Act Impacts Retirement Planning For Companies & Individuals