It’s going to be a busy fall for employee benefit administrators and retirement plan sponsors across the country, as the federal government rolls out guidance and standards related to the SECURE Act.
Small business owners and plan sponsors will want to pay special attention: many of this law’s provisions provide improved options to address the long-term financial well-being of employees and their families.
What is the SECURE Act?
The SECURE Act was passed by Congress in December 2019. The name signifies the intended goal: Setting Every Community Up for Retirement Enhancement.
One important provision of this Act is allowing eligible part-time workers to contribute to employer-sponsored 401(k) plans.
As explained by the Society for Human Resource Management (SHRM):
The SECURE Act includes a new requirement to permit part-time employees to contribute to an employer’s 401(k) or similar plan if the employee works at least 500 hours for three consecutive years. Such long-term, part-time workers must be allowed to contribute to plans starting in 2024. Therefore, hours worked for the years 2021 through 2023 need to be tracked to determine eligibility.
More Tax Credits for Small Businesses Starting Retirement Plans
Previously, small businesses starting retirement plans could receive a maximum tax credit of $500. Under the SECURE Act, the maximum tax credit is $5,000. Financial-Planning.com offers cautions and advice on further understanding and implementing the new guidelines, importantly noting:
- The maximum tax credit a small business is eligible to claim, however, is limited to the greater of $500 or the lesser of (a) $250 multiplied by the number of non highly compensated eligible (NHCE) employees eligible to participate in the plan or (b) $5,000.
- The credit can be carried forward for up to three tax years and can be claimed for any employer-sponsored plan such as a 401(k), 403(b), SIMPLE IRA or SEP IRA.
Plan sponsors can get more advice about the new tax credits and eligibility.
Protecting Retirement Plans—and Plan Sponsors Too
Remember, the U.S. Department of Labor requires employers to have ERISA Fidelity Bonds to protect employee benefit plans against losses caused by acts of fraud and dishonesty. You can obtain your ERISA Fidelity Bonds right now via Colonial Surety Company’s unique, direct, online service. You are just a few clicks away!
Colonial is licensed in all 50 states and U.S. territories and makes it easy to obtain your I-Bond® (instant, online surety bond). We also include retroactive ERISA fidelity bond coverage for past years when the plan was not covered.
Colonial Surety Company focuses on making it easier, faster and more cost-effective for small businesses to operate. Our packages include Fiduciary Liability insurance to protect plan sponsors—and Cyber Liability insurance to further protect your company and plan. Everything you need is right here.