Instruc(k)tions #001: The Secure 2.0 Tax Credits for New Retirement Plans
March 7, 2023
Read time: 2 minutes
Never have we seen legislation so inviting to the start-up retirement plan.
In the past many small business 401(k)s were not started due to the cost.
That is no longer the case.
Below you will find the details on how the credits work beginning January 1, 2023.
Credits available for Employer Paid Expenses:
Maximum tax credit available remains at $5,000 per employer
Credits available for the first 3 years from plan establishment
$250 credit per non-highly compensated eligible employee
100% tax credit for employers with 50 or fewer employees
Credit cannot exceed expenses paid
Credits available for Employer Contributions to the plan:
Max $1,000 credit of employer contributions per employee the first year
Phases down over 5 years from plan start (100%, 100%, 75%, 50%, 25%)
Credits only apply to those employees earning less than $100,000
Applies to companies with < 100 employees, phases out over 50
No deduction for employer contributions qualifying for credit
Over the last four years, the credits evolved from $500 for three years, to $5,000 for three years, to Secure 2.0 allowing $5,000 for up to five years!
What is not covered?
Contributions to a Defined Benefit Plan including Cash Balance Plans
Plan expenses charged and paid for by the employees of a plan
Annual plan paid expenses over $5,000
Business is waiting for you and cost is no longer an issue.
Thank you Secure 2.0.
Whenever you’re ready, there are 2 ways I can help you:
1. For tips on Retirement Plans follow me on LinkedIn: @drewtirney
2. Free client/prospect consulting to add new business to your book: drew@401kinabox.com
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