By Christopher Magno, SVP/General Manager, Retirement Services, ADP
The new SECURE Act 2.0 and other legislation focuses on making it easier for small businesses to offer a retirement savings plan, including a significantly higher tax credit to cover start-up costs.
[NOTE: An updated article is now available: SECURE 2.0 Act of 2022.]
With hundreds of provisions included in the recent flurry of retirement plan-related legislation, it's easy to miss those that could have the most immediate positive effect on your small business.
But here is one that's truly a no-brainer in terms of impact — proposed changes to the current tax credit legislation for small employers. Changes to the current legislation are being proposed in both House and Senate Finance Committee bills. Both bills offer positive changes to the existing legislation, but it remains to be seen what language will make it into the final bill.
The two bills vary in the amount and structure of the tax credits, as well as the timing for rollout. We'll advise as soon as final decisions are made, so your business can be sure to take advantage all applicable new provisions.
Employees want (and need) a retirement savings plan
During the past decade, access to an employer-sponsored retirement plan has consistently ranked high on employees' lists of must-have benefits. In the current volatile labor market, it's become an even more vital component for attracting qualified employees, staying ahead of the competition and controlling expensive turnover.
Not convinced? Sixty percent of employees now identify retirement benefits as the reason they stay with their current employer, up from just 40 percent a decade ago. Further, 47% said those retirement benefits were a primary reason why they joined their employer in the first place, nearly double the employees who felt the same in 2010.
Of course, the retirement-focused legislation — including the EARN Act and Starter 401(k) Act in addition to the SECURE Act 2.0 — has many more benefits for businesses beyond tax credits, including provisions to:
- Cut down on paperwork required of plan sponsors
- Reduce penalties for certain reporting errors
- Consolidate multiple plan participant notices into a single document
- Require automatic enrollment to increase plan participation
By reducing or eliminating common barriers for small businesses and making it easier for employees to save, more Americans will hopefully be on the path to retirement readiness sooner rather than later.
As all the legislation mentioned above is still being finalized, check back often to stay current on potential impacts to your business. And if you're among the small businesses that currently don't have a plan in place, there's no time like the present to start evaluating your options.
For information on how the legislation might impact your current retirement plan — or to start the process to offer a retirement plan — reach out to ADP today.
ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor. ADPRS-20220920-3614