SECURE 2.0 Retirement Credits

Originally Published on 5/16/24

Under the SECURE Act 2.0, the maximum retirement plan start-up tax credit was increased from 50 percent of qualified plan start-up costs to 100 percent of those costs (the three-year period over which that credit applies did not change) for employers with 50 or fewer employees. The law also created an additional tax credit for a percentage of the employer's contributions made to employees with compensation that does not exceed $100,000 for the year. The additional credit cannot exceed $1,000 per employee and will phase out over a five-year period. The additional credit also phases out for employers with between 51 and 100 employees, and the credit is reduced by 2% for each employee that exceeds the 50-employee limit in the prior year. The new provisions were effective beginning in 2023.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether the new retirement-related tax credits will be a significant factor in motivating small business owners to offer retirement savings options.