SECURE 2.0 Tax Credits to Expand Retirement Plan Access

Expanding Retirement Plan Access:

How SECURE 2.0 Tax Credits Help More Americans Save

One of the most effective ways to improve retirement outcomes is to ensure that more Americans have access to a workplace retirement plan is. Recognizing this, Congress passed the SECURE 2.0 Act to further incentivize businesses—especially small businesses—to offer retirement plans by providing meaningful tax credits and financial incentives.

If you’re a business owner, financial advisor, or CPA, understanding these incentives can help you maximize benefits for both employers and employees. Below is a breakdown of the key tax credits and incentives introduced or expanded by SECURE 2.0.

Increased Startup Plan Tax Credit: For businesses starting a new retirement plan, SECURE 2.0 enhances the existing startup tax credit
- The credit covers 100% of administrative costs (up from 50%) for businesses with up to 50 employees, capped at $5,000 per year for the first three years.
- Businesses with 51-100 employees can still receive a 50% credit, subject to the same $5,000 cap.
- This helps small businesses overcome the initial cost barrier of establishing a plan.
Employer Contribution Tax Credit: A major new incentive is a credit for employer contributions to newly established plans
- Employers with up to 50 employees can receive a credit for employer contributions up to $1,000 per employee.
- This credit phases out over five years and is gradually reduced for businesses with 51-100 employees.
- The goal is to encourage businesses not just to offer a plan, but also to actively contribute to employees’ retirement savings.
Automatic Enrollment Tax Credit: Incentivizing companies to add auto-enrollment to their plans
- To increase plan participation, SECURE 2.0 provides an additional $500 annual credit for businesses that implement automatic enrollment in their retirement plans. This credit is available for new or existing plans.
- Available for the first three years of a new plan.
- Encourages higher participation rates, which leads to better retirement outcomes.
Military Spouse Participation Incentive: Rewarding businesses that improve plan access for military spouses
- Many military spouses face challenges in saving for retirement because of frequent relocations. SECURE 2.0 provides a tax credit of up to $500 per year for small businesses that make their plans more accessible to military spouses by:
- Making them eligible to participate within 2 months.
- Ensuring they are 100% vested in employer contributions.
- Making them eligible for matching or nonelective employer contributions.

These credits can be claimed annually using Form 8881. Despite their availability, many businesses have failed to claim them, often due to lack of awareness by the business or their CPA, leaving potentially significant tax credits on the table.

How We Can Help

At ERISA Consultants, our mission is to improve retirement outcomes by helping businesses navigate plan setup, administration, and optimization. Whether you’re considering implementing a plan for the first time or looking for ways to enhance an existing one, we can guide you through the process.