New legislation passed in December 2019 makes it better than ever to offer a retirement plan for your employees.
The SECURE Act (Setting Every Community Up for Retirement Enhancement) was passed on December 19, 2019 and includes revised tax credits to help employers offset the costs of having a retirement plan!
The SECURE Act increases the Retirement Plans Startup Costs Tax Credit limit from $500 per year to $5,000 per year. The guideline for the new limit on the tax credit is the greater of:
- $500 or
- The lesser of (a) $250 multiplied by the number of non-highly compensated employees of the eligible employer who are eligible to participate in the plan or (b) $5,000. The setup tax credit continues to apply for three years.
The SECURE Act also adds a new tax credit of $500 for companies that offer automatic enrollment to a new or existing retirement plan.
Let’s take a look at how the tax credit could apply to retirement plans offered by Corporate Payroll Service’s Retirement Services!
Scenario 1
Company A, a four-employee company which runs payroll semi-monthly, decides to offer a SIMPLE IRA with a 1% match. There is a one-time setup cost of $250 and a per payroll administrative fee¹ of $25. The total administrative costs for the first year would be $850³.
Tax Credit:
Applying the new tax credit, Company A would receive all of their administrative fees back in tax credits! $250 x 4 eligible employees = $1000 in tax credits, capped at the costs of the plan $850.*
Scenario 2
Company B, a company with 20 employees which runs payroll semi-monthly, decides to offer a 401(k) plan with automatic enrollment. There is a one-time setup cost of $390, a monthly base fee of $100², and a per payroll administrative fee of $15¹. This brings the total administrative expenses to $1950³ for the first year.
Tax Credit:
Applying the new tax credit, Company B would receive all of their administrative fees back in tax credits!
$250 x 20 eligible employees = $5000 + $500 automatic enrollment credit = $5500 in tax credits, capped at the costs of the plan $1950.*
These new and revised tax credits make retirement plans affordable for businesses of all sizes! To learn more about our retirement services and to discuss which plan works best for your company, click here to schedule a time to speak with one of our licensed retirement service advisors today!
Investment advisory services provided by Actify Investor Retirements, LLC dba CorPay Retirement Services. Actify Investor Retirements, LLC is a Registered Investment Advisor. Information presented is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein.
*You are responsible for consulting your own tax advisor as to the tax consequences associated with your retirement plan. The tax rules governing options are complex, change frequently and depend on the individual taxpayer’s situation. Although Corporate Payroll Services and its affiliates may make available general tax information, you agree Corporate Payroll Services and its affiliates shall not be held liable or responsible for making such information available to you and any tax or financial consequences you may incur in connection with your retirement plan.
¹Per payroll administrative fees are charged by Corporate Payroll Services for the facilitation of data sharing with qualified custodians. These fees may vary depending upon your payroll frequency and type of plan selected.
²Monthly administrative fees for 401(k) depends upon the platform and Third Party Administrator selected by the sponsor for the plan. Third-Party Administrators are required for 401(k) plans and are not affiliated with Corporate Payroll Services or its affiliates.
³Participants of both SIMPLE IRA and 401(k) plans may be charged separate and additional fees to their account balances. These fees are not eligible for reimbursement under the SECURE Act tax credits.
