Tax Credits for Small Employers that Setup Retirement Plans.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, a significant update to the retirement savings landscape, offers a suite of new incentives for employers to support their employees' retirement planning. One of the most notable introductions in this act is the enhanced tax credits for employers who establish retirement plans.

Credits claimed on Form 8881.

Credit for Small Employer Pension Plan Startup Costs

Applicable to businesses with up to 100 employees.

Qualified startup costs. Qualified startup costs are expenses paid or incurred in connection with (a) establishing or administering an eligible employer plan, or (b) the retirement related education of employees about the plan.

  • Tax credit increased from 50% to 100% of startup costs.
  • The credit is up to $5,000 per year for the first three years.
  • Credit claimed on Form 8881
  • IRC §45E, Small employer pension plan startup costs

Small Employer Automatic Enrollment Credit:

  • An additional $500 annual credit for up to three years.
  •  Applies to new or existing plans incorporating automatic enrollment.
  • Aims to boost employee participation in retirement plans.
  • IRC §414A, Requirements related to automatic enrollment.

This is a summary of the new tax credits under the SECURE Act 2.0. For detailed advice, consult us at Tom Keuler CPA.