March 2, 2023
Leverage SECURE 2.0 Act to Grow Your Business with Small Employer Retirement Plans
Actionable provisions that you can use with current and prospective clients!
The Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022 (SECURE 2.0) aims to expand access to employer-sponsored retirement plans through a range of provisions.
These changes can open new markets for you to establish retirement plans with small business owners and non-profit organizations. Setting up a SIMPLE IRA, SEP IRA or other Defined Contribution plan with an employer will give you access to all their employees along with the owner to offer NLG Fixed Indexed Annuities – FIT Secure Growth and FIT Select Income – as well as solving for their Life Insurance needs.
For a more comprehensive list of the most pertinent and wide-reaching provisions that may impact the way you and your clients save for retirement, Highlights of Secure 2.0 Act of 2022
Many of these new provisions are excellent conversation starters when prospecting small business owners and non-profits.
The following is a summary of SECURE 2.0 actionable provisions that you can use with current and prospective clients.
Tax Credits Reduce the Amount of Taxes Owed on a Dollar-for-Dollar Basis
Small Employers with fewer than 50 employees can receive a tax credit of 100% of what it cost them to create a retirement plan for their employees. Credit can be claimed by the employer for five years after setting up a plan – percentage of cost covered is 100% for first two years, 75% year three, 50% year four and 25% year five. (Section 102 is effective NOW) Employers with up to 100 employees may be entitled to a tax credit based on their employee matching or profit-sharing contributions. This credit, which caps at $1,000 per employee, phases out over five years. Employers with 51 to 100 employees may have further reductions to the credit amount. (Combined Limits under IRC Section 404(a)(7)) Eligible employers who add an auto-enroll feature to their plan can claim a tax credit of $500 per year for three years (Section 101) Required Minimum Distributions Penalty
Help Your Clients Catch-Up on Retirement Savings
Starting in 2025 individuals ages 60, 61, 62, or 63 will be allowed a catch-up of $10,000 or 150% of the catch-up limit for that year, indexed for inflation. Plan for clients and prospects age 57, 58 to take advantage starting in 2025. (Section 109)
Starting in 2024 employers can make matching contributions to an employee’s retirement plan per the plan provisions when an employee makes a student loan repayment. Plans eligible for this provision include 401(k), 403(b), 457(b) and SIMPLE IRAs. (Section 110)
Provides small employers a tax credit if they make military spouses immediately eligible for plan participation within two months of hire, The tax credit equals the sum of (1) $200 per military spouse, and (2) 100 percent of all employer contributions (up to $300) made on behalf of the military spouse, for a maximum tax credit of $500. (Section 112)
Auto-enroll Retirement Plans are Coming
Auto-enroll has already been enacted in 14 states and another 15 states are looking to enact similar plans. Bottom line auto-enroll is coming, why not offer an employer the option to open a plan on their own terms and take advantage of the flexibility that comes with creating their own plan and the tax credits currently being offered? Exceptions from this provision include small businesses with 10 or fewer employees, new businesses less than 3 years old, churches and governmental plans. (Section 101)
Help Preserve Your Clients Income
Under current law, simplified employee pension plans (“SEPs”) can only accept employer contributions and not on a Roth basis. The Act allows employers to offer employees the ability to treat both employee and employer SEP contributions as Roth contributions (in whole or in part).
(Section 601) effective for taxable years beginning after December 31, 2022
The age at which owners of retirement accounts must start taking RMDs will increase to 73, starting January 1, 2023. Will increase to age 75 starting January 1, 2033. (Section 107)
Required Minimum Distributions Penalty
The existing penalty for failing to take a required minimum distribution is 50%. Starting in 2023, this penalty will be reduced to 25%. (Retirement Plan and IRA Required Minimum Distributions FAQs)
While the Act provides increased opportunities to save for retirement, everyone’s financial situation is unique. As always, recommend your clients’ consult their tax or legal advisors for guidance on how the Act’s provisions apply to you.
For a more comprehensive list of the most pertinent and wide-reaching provisions that may impact the way you and your clients save for retirement, click on the button below.
