Retirement seems pretty nice, doesn’t it? Even the most dedicated employees out there, those that approach their seven-day workweek commitments with enthusiasm and zeal, dream of the day that they can hang up their ties so as to enjoy their senior years. Fortunately, many contemporary businesses view retirement as a driving force behind many workers, and offer comprehensive benefits packages to help supplement this.
The Accounting Solutions Ltd. team has worked with many companies looking to add retirement plans to their benefits list, and are always excited to watch them unfold. In order to continue to keep our followers informed, today we wish to explore the Setting Every Community Up for Retirement (SECURE) Act, a law that was put into place in December 2019. This novel system adds tax breaks and alters some of the old rules governing employer provided retirement plans.
Business owners that offer retirement plans should take note of the following:
- Employer Collaboration: One of the most impactful tenets of the SECURE Act helps facilitate the creation and maintenance of MEPs (Multiple Employer Plans). With these arrangements two or more unrelated companies can collaborate in order to produce one conjoined retirement package. While MEPs have always existed, in the past they have faced significant financial barriers impeding their creation. The SECURE Act aims to help corrode these hurdles, so that there are more opportunities for small employers to band together. Once the new rules are finalized in 2021, companies will be able to collaborate for enhanced investment results, which will tie into reduced costs overall.
- Small Employer Auto-Plan Credit: Companies that seek to retain their staff have a tendency to offer great benefits, including retirement plans. This acts as a two-way street, as productivity and overall job satisfaction is proven to increase in tandem with enhanced perks. As of this year, a tax credit of $500 per year applies to all employers who automatically enrol their staff into new 401(k) and SIMPLE IRA plans. When compiled with the plan start-up credit that has been in place prior to the SECURE Act, owners will have plenty of extra incentive to offer retirement plans.
- Credits For New Plans: In another move that aims to assist small businesses, the government now offers an extra tax credit that helps supplement all costs tied to the creation and implementation of a new retirement plan. Now, the overall credit has increased by altering the calculation of the flat dollar amount limit to greater than $500, $250 multiplied by the number of non-highly compensated employees who are able to participate in the plan, or $5,000 flat-out.
While the SECURE Act does cover more ground, the aforementioned points are of particular interest to small business owners. The sourcing and retention of a motivated workforce are important factors guiding many professional decision-makers, and are of particular relevance to fledgling organizations that have plenty to gain from the actions of these key players. Because of this, it is important that employees are fairly compensated for their work, which can be boosted by the addition of a retirement plan.
Everyone, including the Accounting Solutions Ltd., dreams of a pleasant and peaceful retirement. With the SECURE Act, employers now have extra incentives to help their workforce achieve their goal. If you have any questions regarding potential credits or benefits for your organization, or are interested in setting up a retirement plan, then don’t hesitate to contact us today.