What is Secure Act 2.0?

 

The SECURE Act is intended to make it easier for Americans to save money in retirement, by allowing them to invest more money in tax-advantaged accounts and to withdraw that money later. It also makes it easier for small businesses to set up 401(k) plans for their employees and expands the range of investment options.

​

Employer benefits

​

• Increased tax credit for new pension plan start-up costs. Starting in 2023, the tax credit for start-up costs of setting up a new defined contribution plan is increased for small employers. For employers with 50 or fewer employees, the tax credit increases from 50% up to 100% of the qualified costs incurred in the first three years of starting up a new plan. The credit is still limited to $5,000 per year. Employers with 51 to 100 employees are still eligible for the credit of 50% of qualified start-up costs for the first three years, with a maximum credit of $5,000 annually.
   

• Employee Auto Enrollment. Automatic enrollment allows an employer to automatically deduct elective deferrals from an employee's wages unless the employee makes an election not to contribute or to contribute a different amount.  Employers who implement a new retirement plan and implement employee auto enrollment will receive a tax credit of $500 per year for the first three years.
   

• Employee retention. Retirement benefits are becoming increasingly important to employees. A recent study found that two-thirds (68%) of workers said a retirement plan was a critical factor in deciding whether or not to accept a job, while 63% said a plan was a critical factor in staying with a job. In short, a 401(k) plan can be powerful tool for employers to attract and retain employee talent.

Employee benefits
 

• Employee contributions can reduce current taxable income.
   

• Contributions and investment gains are not taxed until distributed.
   

• Contributions are easy to make through payroll deductions.
   

• Interest accrues over time, which allows small, regular contributions to grow to significant retirement savings.
   

• Retirement assets can be carried from one employer to another.
   

• The saver's credit may be available to some employees.
   

• Employees can improve financial security in retirement.