As a business owner, you are probably well-aware that offering a 401(k) plan to your employees has its advantages—ease of talent acquisition, increased retention rates and high morale. But if you happen to be a small business owner, providing a retirement plan to employees may not seem entirely feasible. Start-up costs are often expensive, the administrative burden of account maintenance can be overwhelming and employee participation isn’t necessarily guaranteed.
In an effort to increase employee participation, simplify investment selection and alleviate the financial burden of both start-up costs and maintenance fees associated with the implementation of retirement plans, the SECURE Act legislation created the Small Employer Automatic Enrollment Credit. This credit allows employers to take up to $500 per year for newly created 401(k) and SIMPLE IRA plans that include the automatic enrollment of new hires. The credit is also available to those who choose to convert an existing plan to the automatic-enrollment plan.
Even better news. The Small Employer Automatic Enrollment Credit may be taken in addition to the recently-increased Small Employer Pension Plan Start-Up Credit and is available for three years.
For questions about these credits or other tax issues, please contact your Henry+Horne tax professional.