NEW YORK (AP) — Many small businesses don't offer a retirement plan to employees, since it can be quite costly and complicated.
But the Secure Act 2.0 passed by Congress in late 2022 and being slowly rolled out is designed to make it easier for small businesses to offer retirement plans.
That's key — because offering a retirement plan can be a way to keep and retain quality employees.
The act allows small businesses to band together to pool resources to offer plans, called Multiple Employer Plans. While initially that could be a burden to set up, it would offer savings down the road since companies can save money on administrative costs.
Also, there's a tax credit for small businesses starting new employee plans. The credit is up to 100% of the startup costs for adopting and maintaining a new 401(k) plan, capped at $5,000.
There's also a tax credit based on employer contribution, up to $1,000 annually per employee, over the plan's first five years.
To qualify for either credit, small businesses must have no more than 100 employees who received compensation of $5,000 or more in the preceding year, and not have offered a plan covering substantially the same employees during the previous three tax years. Talk to your tax adviser to see if you might qualify for these credits.
Another tax credit of $500 is available for up to three years for small businesses with 100 or fewer employees that add an eligible automatic contribution arrangement to their plan.
