What’s the SECURE Act 2.0?

By Emily Burch Harris
March 8, 2023

Congress made sweeping changes to the nation’s retirement system to allow employees to save and invest toward their retirement when senators and representatives crafted the SECURE Act, which became law on Jan. 1, 2020. This was the largest retirement reform since the Pension Protection Act of 2006, and it passed 417-3, indicating that both political parties recognized the need for retirement equity.

The SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement, adjusted the nation’s retirement system. And in 2022, Congress crafted the SECURE Act 2.0 to include additional changes. SECURE Act 2.0 became law on Dec. 29, 2022. 

The act offers significant advantages for both the employers who offer a retirement plan and the employees who participate in the plan. The SECURE Act not only maximizes incentives for employers who offer a major recruitment tool, but it also expands individuals’ access to tax-advantaged accounts — giving them more opportunities to save and invest toward a dignified retirement. 

At Fingercheck, we’re ready to help you grow your business and your team’s retirement savings. That’s why we’ve partnered with industry-leader Human Interest. The Human Interest team manages retirement plans. If you’re ready to get started, click here

And we have great news for you! We are co-hosting a webinar on March 21 at 1:30 EST. Register here to learn about the SECURE Act 2.0 and why now is the best time to start a 401(k).  

Why two parts? What’s the difference?

The initial SECURE Act allowed for 29 provisions. The most critical of those provisions, according to Kiplinger, affecting retirement plans were:

  • Raising the age of Required Minimum Distributions.
  • Removing age limits for retirement contributions.
  • Reducing the annual qualified distribution by the aggregate amount equal to contributions made to an IRA after age 70½.
  • Modifying the 10-Year Distribution Rule for most non-spousal beneficiaries.
  • Making changes to 401(k) information estimates from investment providers.

The SECURE Act 2.0 builds on the original bill and provides dozens of benefits for employers and employees. Our trusted retirement partner, Human Interest, reports that the SECURE Act 2.0 is a huge step forward in addressing the retirement savings gap, adding more than 90 new retirement plan provisions. 

SECURE Act 2.0 introduces several significant changes for small businesses and people saving for retirement by:

  • Promoting saving earlier for retirement, as well as increasing some limits.
  • Boosting incentives for small businesses to offer retirement plans.
  • Offering employees age 60+ more flexibility for saving as they approach retirement.

What does the SECURE Act 2.0 mean for small business owners? 

Put simply, you now have the chance to start a retirement plan for your employees and lower your company’s tax liability. And, if your business is eligible, you can take advantage of tax credits and a recruiting and hiring benefit.

The SECURE Act 2.0 expands on several of the incentives created by the original SECURE Act. Here are ways it might impact your small business:

  • Doubling tax credits for new plans.
  • Expanding eligibility for the start-up tax credit.
  • Adding new credits for employer contributions.
  • Maintaining tax credit for using auto-enrollment.

If your small business has up to 50 employees, SECURE Act 2.0 increases the existing tax credit to 100% of plan start-up costs (up from 50%), which is capped annually at $5,000 per employer (and remains unchanged) for each of the first three years. That could mean a total of $15,000. 

Eligible businesses with 51 to 100 employees are still subject to the original SECURE Act’s tax credits equal to 50% of administrative costs, capped annually at $5,000 per employer for three years.

Are you a start-up? The legislation extends start-up tax credits based on the year employers join existing multiple-employer plans, rather than only if they join new plans.

Are you offering employer contributions as a new business? Small businesses with up to 50 employees will receive a new tax credit based on a percentage of employer contributions, up to $1,000 per employee for employees making less than $100,000 in the prior year (excluding employer contributions as elective deferrals under Code Sec. 402(g)(3) or to a defined benefit plan under Code Sec. 414(j)). 

Eligible employers with between 51 and 100 employees qualify for a credit phase-in equal to:

  • 2 percentage points for each employee for the preceding taxable year in excess of 50 employees.
  • The amount determined above, multiplied by 100% in the first and second years, 75% in the third year, 50% in the fourth year, and 25% in the fifth year.

Are you using automated enrollment? If so, the tax credit of $500 per year for the first three years of electing auto-enrollment is still available.

How Fingercheck helps you

At Fingercheck, we want to ensure you can focus on growing your business. That’s why we are committed to delivering innovative solutions for small business owners. Our Human Interest partnership is designed to let you offer retirement benefits to your employees. Let us help you get set up now.

Register here and join us on March 21 at 1:30 EST to learn why now is the best time to start a 401(k) and to learn more about the SECURE Act 2.0. We can’t wait to see you!

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