Many Provisions in 2019 SECURE Act Affect Retirement Plans
Many Provisions in 2019 SECURE Act Affect Retirement Plans
In December 2019, the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) enacted many provisions that could impact retirement savings and planning for business owners. Below, we have outlined several significant changes that were enacted by the law, effective January 1, 2020:
- Credit to offset qualified start-up costs: Certain employers may qualify for a tax credit (can be up to a maximum of $5,000) to offset qualified start-up costs when adopting a new qualified retirement plan.
- Automatic enrollment credit: Certain eligible small employers may now claim a credit of up to $500 per year for three years by converting an existing plan to an automatic enrollment plan (which provides the default for new participants to defer compensation at an established rate into the plan; participants can still opt out or adjust the rate).
- Timing the adoption of a new plan: Plans that are adopted by the income tax filing due date of your business (including extensions) may now be treated as having been in effect during the tax year. Prior to the Act, a qualified employer retirement plan had to be established no later than the last day of the tax year.
- New options for reducing administrative costs: Certain groups of unrelated employers may now file a single Form 5500, which could reduce administrative costs for employers. The Act also directed the IRS to develop a simplified group filing option for plan years beginning after December 31, 2021.
- Part-time employee eligibility: Long-term employees working 500 or more hours per year for three consecutive years will now be eligible to participate in employer provided 401(k) plans.
- New restriction for plan loans: Retirement plans are now barred from making loans through credit cards or similar arrangements. Any such advance to an employee will now be treated as a distribution to the employee.
The SECURE Act contains many additional complex provisions which were not outlined above. Please contact us if you have any questions regarding how these new provisions may impact your business or think you may be eligible for some of the new credits.