If you’ve been considering starting a retirement plan for your employees, the timing has never been better. Thanks to SECURE Act 2.0, small and mid-sized businesses can now take advantage of substantial tax incentives that dramatically lower the cost of launching and maintaining a 401(k) or similar retirement plan.
At Newburg CPA, we’re here to help you understand and leverage these new benefits while ensuring your plan is compliant and audit-ready.
Three Powerful Tax Credits Available to Employers
1. Startup Plan Cost Tax Credit
- Eligibility: Employers with 50 or fewer employees can receive a credit for 100% of eligible startup costs, up to $5,000 annually for 3 years.
- For companies with 51–100 employees, the credit is 50% of eligible costs.
- Covers: Plan setup, administration fees, and employee education.
2. Employer Contribution Tax Credit
- Receive up to $1,000 per employee (earning under $100,000) annually for employer contributions.
- Companies with ≤50 employees: Get 100% of the credit in years 1 and 2, phasing down to 25% by year 5.
- Companies with 51–100 employees: Credit scales based on employee count.
3. Automatic Enrollment Tax Credit
- Add or maintain an automatic enrollment feature and receive a $500 credit per year for 3 years.
How the Credits Add Up
These credits can be combined to deliver substantial savings over a multi-year period. Example: A business with 45 employees starts a 401(k) with automatic enrollment and employer matching. 30 employees earn less than $100,000 and participate.
- Startup Plan Credit: $5,000/year for 3 years ($250/employee capped at $5,000)
- Employer Contribution Credit: $1,000 x 30 employees = $30,000/year for 5 years
- Automatic Enrollment Credit: $500/year for 3 years
- Total Potential Credit (Years 1 & 2): $35,500 per year
- *NOTE: reduced employer contribution credit will only apply in years 3, 4, and 5.
Start Smart with Newburg CPA
Whether you’re launching a plan for the first time or ensuring your existing retirement benefits meet compliance standards, our team can guide you through the process. We can also help assess if you need a 401(k) audit and make sure you’re prepared well in advance.
Questions about plan setup, contributions, or audit requirements?
Contact our team today — we’re happy to help you make the most of these valuable incentives.