Tax Credits for Business Owners who Start a 401k

A lot has changed in the last few months for small businesses, but one of the positive changes we’ve seen comes from the SECURE Act. Previously, employers who had implemented a 401(k) plan for their company received a flat $500 tax-credit, which wasn’t enough of an incentive for some. With the SECURE Act, employers will be guaranteed a minimum of $500 with a maximum of $5,000 for up to three years! If you are looking for tax savings, this is a great place to start. The final amount is determined by the number of employees that sign up for the plan. Shameless plug: we help make enrollment simple for you and your employees!

Encouraging Employees To Enroll Automatic enrollment (often called auto-enrollment) is a great tool to get more employees enrolled. Participants have the option to opt OUT, but aren’t dealing with the hassle of enrolling. It’s a great way to urge employees to start saving for their retirement. We find that one of the top reasons that employees don’t enroll is because they don’t understand or it seems complicated. What’s more, is that the SECURE Act offers an additional $500 tax-credit for those 401(k) or Simple IRA plans who use automatic enrollment for their participants!

Extension Of The Timeline The SECURE Act has also pushed the timeline for employers to decide if they want to implement a 401(k) or Cash Balance plan. Instead of the December 31st deadline, they now have until their next filing date (including extensions) to decide whether or not they want to implement a plan for the previous year.

This rule went into effect for plans starting in 2020 for the 2020 tax year.

This won’t be eligible for the 2019 tax year.

These incentives give the employer a way to offset the costs associated with a retirement plan that helps with recruiting high-quality employees, employee retention, and tax management.

We see the passing of the SECURE Act as positive for small businesses.

If you have any questions, feel free to schedule a consultation with us (click here).


Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

Direct: 952.828.5336

Email: kurt@ivoryhill.com