Find out what you can do as a broker to further support your business clients in implementing retirement plans and claiming SECURE 2.0 tax credits.
Key takeaways:
- SECURE 2.0 offers significant tax credits for small businesses implementing retirement plans.
- Brokers play a crucial role in guiding clients on eligibility, compliance and plan design.
- Partnering with a PEO provides enhanced back-office support and access to premium benefits.
As a benefits broker, you can help small businesses unlock tax savings and improve employee retirement benefits via the SECURE 2.0 Act. Signed into law in 2022, this legislation has brought a host of opportunities for employers to benefit from valuable tax credits while helping their employees prepare for retirement.
But navigating these changes can be complicated; that’s where benefits brokers step in as trusted advisors. Here, we’ll cover the basics of SECURE 2.0 tax credits and how you can help your clients take advantage of them.
How SECURE 2.0 Helps Employers Maximize Savings
The SECURE 2.0 Act builds on the original SECURE Act of 2019, introducing provisions to make retirement savings more accessible and equitable. For small businesses, one of the most compelling updates is the expansion of tax credits for retirement plan implementation.
Employers can now recoup a significant portion of the startup costs for offering 401(k) or SIMPLE (Savings Incentive Match Plan for Employees) IRA plans.
Here are some other highlights:
- Enhanced startup credit: Employers with 50 or fewer employees can claim up to 100% of administrative costs, capped at $5,000 annually, for the first three years of a new plan. Employers with 51–100 employees can claim 50% of these costs.
- Employer contribution credit: An additional credit is available for contributions made to employee accounts, up to $1,000 per employee for smaller businesses, phased out gradually as businesses grow.
- Automatic enrollment push: SECURE 2.0 incentivizes automatic enrollment in retirement plans, increasing employee motivation to save.
- $500 Auto-Enrollment Tax Credit: Employers that include automatic enrollment in their new retirement plans can receive an additional $500 tax credit per year for three years, further reducing costs.
Benefits brokers can first help employees by understanding what changed with SECURE 2.0 and how they can take advantage of new tax breaks. Acting as a trusted advisor requires understanding the laws and best practices for businesses to increase tax savings.
How Much Can Small Businesses Save with SECURE 2.0?
For businesses with fewer than 50 employees, the tax savings available through SECURE 2.0 can significantly reduce the cost of offering a retirement plan:
- Startup Cost Reimbursement: A business that incurs $5,000 in administrative costs to establish a new retirement plan can receive a full reimbursement through the SECURE 2.0 startup credit.
- Employer Contribution Credit: If the company contributes $1,000 per employee for 10 employees, it qualifies for an additional $10,000 in tax credits in the first year.
- Auto-Enrollment Incentive: By implementing automatic enrollment, the business secures an extra $500 per year for three years, totaling $1,500 in additional savings.
Total potential tax savings in year one: $16,500
These numbers show how brokers can position SECURE 2.0 as a game-changer for small businesses, making retirement plans more affordable and competitive.
How Benefits Brokers Can Increase Value for Clients
Benefits advisors play a critical role in translating these legislative changes into actionable strategies for employers. Here are ways you can help maximize the impact of SECURE 2.0 tax credits:
1. Educate Employers on Eligibility
Many businesses may not be aware of these expanded tax credits, or they might assume they don’t qualify. You’re uniquely positioned to clarify eligibility criteria and identify which credits align with the employer’s current or planned employee benefits offerings.
2. Design Cost-Effective Retirement Plans
Navigating retirement plan options can be daunting, especially for businesses starting from scratch with limited budgets. Brokers help businesses tailor solutions that align with budget constraints while maximizing employee engagement, ensuring they are fully leveraging available retirement tax credits.
3. Streamline Implementation and Compliance
From selecting plan providers to ensuring compliance with IRS and Department of Labor regulations, simplify the retirement plan setup process for your business clients. This way, they not only unlock tax credits but also maintain their eligibility and compliance long-term.
4. Improve Employee Benefits Communication
Tax credits are just one component of retirement planning and employee support. Benefits brokers also help businesses communicate the value of these new plans to employees, increasing participation rates.
5. Emphasize Long-Term Value
The SECURE 2.0 Act provides immediate incentives, but brokers should emphasize the importance of building a culture of financial security for employees. Businesses that embrace these changes can differentiate themselves in the talent market, showing prospective employees they’re committed to long-term financial well-being. This is especially true for businesses that offer automatic enrollment, which can both increase participation rates and unlock the $500 auto-enrollment tax credit. Tax credits also reduce upfront costs, making it easier to invest in competitive employee benefits packages.
6. Stay Ahead of Legislative Changes
The SECURE 2.0 Act is part of a developing landscape of retirement and tax legislation. It’s an example of how you can keep clients updated on new developments, ensuring employers don’t miss out on additional opportunities or fail to meet updated compliance requirements.
7. Coordinate with Financial Advisors and CPA
To maximize the value of tax credits, brokers can collaborate with their financial advisors and CPAs. This team approach ensures retirement plan designs are optimized not only for employee benefits but also for the employer’s overall financial strategy.
8. Support Auto-Enrollment Strategies
SECURE 2.0 encourages automatic enrollment, a proven way to increase employee savings. Brokers can guide businesses in implementing this feature effectively. Not only does this support employees’ long-term financial security, but it also makes businesses eligible for the additional $500 tax credit for three years.
9. Monitor Plan Performance and Adjustments
After implementing a plan, brokers continue to add value by monitoring its performance and recommending adjustments. Whether it’s expanding employee benefits, revisiting contribution levels or addressing participation gaps, you ensure the plan evolves alongside the business.
How PrestigePEO Provides Extra Support for Clients
By helping businesses take advantage of SECURE 2.0 tax credits, employee benefits brokers bring even more value to their book of business and strengthen client relationships. SECURE 2.0 provides a giant opportunity for employers to improve their retirement offerings while reducing costs through tax credits. Benefits brokers help them realize these advantages, guiding businesses through every step of the process.
To fully support your small business clients, sharpen your knowledge of SECURE 2.0 and proactively reach out to clients about it. You will position yourself as a trusted partner capable of driving measurable results for your clients and their workforce.
And don’t forget how much difference a partnership with PrestigePEO can make. On top of the support you provide as a broker, a professional employer organization (PEO) assists businesses with a range of HR solutions and services, including compliance, payroll tax management, recruitment and hiring and health, dental and vision insurance.
With the growing number of states mandating retirement plans, partnering with PrestigePEO can help your clients stay compliant while reducing the administrative burden.
Get in touch with PrestigePEO to maximize SECURE 2.0 opportunities for your clients and grow your business.
