Opportunity in the SMB Market with Sean Jordan, Principal Financial Group®
The small to mid-size business (SMB) retirement plan market can be a key growth opportunity for financial professionals who are looking to expand their client base and provide much-needed benefit to a traditionally underserved segment.
With all the new tax incentives for small startup plans and state mandates to either offer a plan or have employees opted-in to a state-run auto-IRA program, now might be the right time to get smaller businesses on board with starting a plan—which can lead to additional opportunities on the wealth management side.
To learn more about the SMB market, we’re joined by Sean Jordan, Vice President of Small and Mid-Market Segments at Principal Financial Group, to discuss why financial professionals need be paying close attention to this segment.
Key Insights:
Evolving Financial Professional Role and Market Growth: Financial professionals who embrace the changing landscape—such as pooled employer plans (PEP) and digital solutions—can differentiate themselves while tapping into a growing market expected to double in 401(k) plans by the end of the decade.
Expanding SMB Market Opportunities: With 99.9% of U.S. businesses having fewer than 500 employees, small and mid-sized businesses (SMBs) represent a significant opportunity for retirement plan financial professionals, especially with the support of new tax incentives and state mandates.1
Retirement Plans Drive Recruitment and Retention: Retirement benefits are increasingly sought by employees, with 94% of SMBs identifying recruitment and retention as top business challenges. Financial professionals can help employers leverage retirement plans to address these needs effectively.
1 SECURE 2.0 Act legislation allows small businesses with up to 50 employees a tax credit of 100% and those with 51-100 a tax credit of 50% of the qualifying start-up costs for a new employee retirement plan for the first three years of the plan as follows but limited to the greater of (1) $500 or (2) the lesser of (a) $250 for each non-highly compensated employee who is eligible to participate in the plan or (b) $5,000.
New tax credit for start-up plans offering employer contributions: A tax credit equal to the applicable percentage of employer contributions, capped at a maximum of $1,000 per employee.
- Applicable to small employers with 50 or fewer employees.
- For employees with 51-100 employees: The credit is phased out by reducing the amount of credit each year by 2% for each employee in excess of 50.
Applicable Percentage:
1st and 2nd year = 100%, 3rd year = 75%, 4th year = 50%, 5th year = 25%, 6th year = 0%
No contributions may be counted for employees with wages in excess of $100,000 (inflation-adjusted). If taking advantage of this tax credit, employer contributions may not also be counted towards “start-up costs” in the start-up tax credit calculation.
Important Information
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals, and other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
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