The SECURE ACT: Impacts on small business owners and employees

SECURE Act impact on small business

If you work for or own a small business the new SECURE Act will likely impact you. As mentioned in our previous blog about the SECURE Act changes, there are now incentives for small businesses to create retirement plans for their employees. Employers with less than 100 employees who start a retirement plan are eligible for tax credits for the first three years. These credits could be potentially up to $250 per employee with a maximum credit of $5,000.

This is significant because it can be expensive for employers to start and maintain retirement plans for their employees. Offering a credit to small businesses that start retirement plans will help offset these large costs and in turn help employees of these small businesses save for retirement.

Before the SECURE Act, the only retirement savings option for employees of small businesses was to contribute to an IRA. Workers can only put $6,000 a year into an IRA but with employer sponsored plans you can contribute significantly more. For example, you can put $19,500 a year into a 401(k) and get an employer match. This SECURE Act change will positively impact small business employees retirement because they’ll be able to save more money each year.

The tax credits will also help small businesses retain good employees because one of the best ways to keep good employees is to offer a retirement plan. Also, it’s less worrisome for small businesses to join MEPs, or multiple employer plans, because if one employer falls out of compliance, their plan is still safe. Before the SECURE Act if an employer fell out of compliance the whole plan would fail, affecting every other employer in the plan. Another change to MEPs, all types of small businesses can join together in an MEP. In the past, the companies had to be in related industries, but now you can have multiple industries included in the same plan. For example, a salon, and a hardware store can now join together in one employer plan.

Bottom line, small businesses did not invest in retirement plans for their employees because they thought they were too small to do so or the costs were too large. This meant that there were many employees out there who were saving very little or weren’t saving anything for retirement. With the new SECURE Act, more people will be better financially positioned for their golden years.

Nathan Boxx, Bradley Newman, Jason Seltzer

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