SIGMT Spring 2023

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92 | SIGNATURE MONTANA FACTS ON FINANCE S MT Are you a business owner who has wanted to offer a retirement plan to your employees, but have been stymied by the costs involved? If so, you may be interested to learn about new legislation that can help open the door to the same type of plan enjoyed by employees of large companies. At the end of 2022, President Biden signed into law the SECURE 2.0 Act, which, among many other provisions, provides tax credits for business owners who want to open a 401(k) plan. e tax credit was introduced in the original SECURE Act in 2019, but it's been significantly increased in the updated laws. If you have 50 or fewer employees, you can now claim a startup credit covering 100% of the costs associated with opening and administering a 401(k) plan, up to $5,000 for each of the first three years of your plan. To qualify for this credit, your business must have at least one employee — besides yourself, if you're the owner — who earns less than $150,000 a year. And you're eligible for the credit even if you join a multiple employer plan (MEP), which, as you may know, is designed to encourage smaller businesses to share the administrative duties involved in offering tax- advantaged retirement plans. SECURE 2.0 also introduces an employer contribution credit, which may entitle your business to a tax credit based on employee matching or profit-sharing contributions. is credit is capped at $1,000 per employee and phases out gradually over five years. It's also subject to further reductions for businesses with 51 to 100 employees. Another SECURE 2.0 provision deals with Roth matching and non- elective contributions. Effective this year, employees with 401(k) plans, along with those covered by 403(b) plans for nonprofit groups and 457(b) plans for government employees can choose to have matching or non-elective contributions made as Roth (aer-tax) contributions. Before this change, employers had to make these matching and non- elective contributions on a pre-tax basis. Of course, you'll need to communicate to your employees that Roth matching or non-elective contributions count as taxable income. e advantage is that your employees can ultimately withdraw the Roth contributions and earnings tax-free, provided they meet certain conditions. In looking ahead, SECURE 2.0 contains other options to make it easier for business owners to offer retirement plans. Starting in 2024, if you don't already provide a retirement plan, you can offer a "starter" 401(k) or "safe harbor" 403(b) plan to employees who meet age and service requirements. ese plans have lower contribution limits than a typical 401(k) or 403(b), and you can't make matching or nonelective contributions. Consequently, a starter plan may be quite aractive to businesses with few employees. And beginning in 2025, 401(k) and 403(b) plans will be required to automatically enroll eligible participants, although employees can choose to opt-out. Also, exceptions will be made for businesses with 10 or fewer employees and businesses less than three years old. Offering a retirement plan is a great asset for business owners who want to aract and keep good employees. And the SECURE 2.0 Act may make it easier for you to achieve this goal. 401(k) Door Opens for Small Business Owners is article was wrien by Edward Jones for use by Michael Plummer Edward Jones Financial Advisor. Edward Jones, Member SIPC

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