Retirement plan advisors looking for help understanding the new startup tax credits provision of SECURE 2.0 have a new resource they can turn to for guidance.
Pete Swisher and the team at Group Plan Systems along with sister company the Pension Resource Institute (PRI) have created “Tax Credits under SECURE 2.0: Easy Reading Version.” The guide to the contains a “back of the napkin” summary for financial professionals, an executive summary, a flowchart describing how to calculate eligibility for the credit, updated text of IRC Section 45E, and more.
Swisher, who serves as Managing Partner at GPS, told 401(k) Specialist they felt the need to produce this new resource because of the high volume of calls they were receiving about the tax credits—”perhaps seven out of 10 SECURE 2.0 calls,” Swisher said.
“We believe advisors will need help adjusting how they talk to small plans under SECURE 2.0, and the tax credits are a key part of that.”
Pete Swisher
“We found that understanding the credits well enough to explain them to a client is not simple. We believe advisors will need help adjusting how they talk to small plans under SECURE 2.0, and the tax credits are a key part of that,” he said.
Nearly half of all Americans work for small businesses, but only about 30% of small businesses offer retirement plans, primarily due to costs of establishing and maintaining them. That’s a problem the architects of the new SECURE 2.0 retirement legislation aimed to address with the new startup tax credit provision.
SECURE 2.0 increases the startup credit from 50% to 100% for employers with up to 50 employees. The $5,000 cap remains.
The new credit also offsets up to $1,000 of employer contributions per employee in the first year, phased down gradually over five years, though not for employees making more than $100,000 (indexed for inflation). The small employer tax credit increase was effective as of Jan. 1, 2023.
The enhanced startup credit is perhaps the single highest-impact provision of SECURE 2.0, making it worth advisors’ time to study. The new “Easy Reading Version” resource, available at this link, also includes answers to some frequently asked questions (FAQs) and a diagram for helping determine whether an employer is eligible for the credit.
The new resource release comes on the heels of a broader resource GPS’ Cherisha Chapman and Swisher created shortly after SECURE 2.0 became law—the “SECURE 2.0 Quick Reference Guide,” which includes the Top 10 highest-impact provisions, Top 5 new burdens, and a summary of all 92 provisions.
SEE ALSO:
• Great SECURE 2.0 Advice for Advisors: VCI Industry Leaders Summit
• 401(k) Specialist SECURE 2.0 Guide
• 6 Important SECURE 2.0 Provisions Retirement Advisors Should Know