American workers face challenges with their future outlook, with only 43% expecting financial security during retirement, according to a Gallup survey. To address this, the SECURE 2.0 Act, signed into law in 2022, introduces crucial changes that are transforming retirement for American workers.
Small Business Advantage
401(k) plans are crucial for businesses to attract talent, with 88% of workers deeming it a must-have benefit. SECURE 2.0 addresses cost barriers for small businesses, making it more affordable for them to offer these plans.
Tax Credits for Small Business:
The law offers significant tax credits for small businesses, allowing a three-year start-up credit covering 100% of administrative costs, up to $5,000 annually. This eases the financial burden of establishing a 401(k) plan for smaller businesses.
Employee Incentives:
SECURE 2.0 introduces incentives for employees with student loans. Employers can make matching 401(k) contributions when employees make student loan payments, targeting a demographic dealing with student debt.
Automatic Enrollment and Increased Contributions:
Starting in 2025, the law mandates automatic enrollment for eligible employees in new 401(k) or 403(b) plans. It encourages higher participation, and individuals aged 60 to 63 can contribute an increased amount of $10,000 as catch-up contributions.
Emergency Savings and Part-Time Workers:
Businesses can now include emergency savings accounts in 401(k) plans, aiding employees facing unexpected expenses. Part-time workers become eligible for retirement plans after just two years, ensuring quicker access to benefits.
Affordable Retirement Plans:
Small businesses pay zero administrative costs for the first three years. A “Starter 401(k) plan” option allows simplified retirement plans without mandatory employer contributions.
In a competitive job market, providing retirement plans is essential for attracting top talent. The SECURE 2.0 Act makes it cost-effective for small businesses to offer retirement benefits, transforming retirement for American workers.