No matter how much they love their job, every working American looks forward to the day that they can retire. Retirement is the reward at the end of the road, the promise of time and freedom to pursue dreams, engage in hobbies, or just find a good spot to relax in. Retiring and living comfortably in retirement are two different things, however. Living comfortably takes long-term planning and requires employees to partner closely with their employers to take advantage of the business’s retirement plan.
This past December the Senate approved a new piece of legislation called the SECURE Act which stands to change the rules for retirement plans offered by small business owners, greatly impacting both employer and employee.
SECURE stands for Setting Every Community Up for Retirement Enhancement. The main goal of the bill is to increase employee access to retirement plans and financial products. A substantial portion of American Workers are woefully under-prepared for retirement. SECURE seeks to give a more broad, accessible range of retirement options to your workers and promote financial stability for working-class Americans.
The SECURE Act has a number of different implications for small business owners. These new rules may change how you administrate your plans, or even change the type and quality of the plans that you offer.
The SECURE Act greatly increases tax credits available to employers that offer small business plans. These tax credits can be up to $500 per employee. Speak to the tax experts at Foster Financial to help you qualify for the maximum allowable credit that your company can obtain.
The bill also promotes an increase in retirement plan auto-enrollments. Under SECURE, employers are now allowed to enroll up to 15% of employee wages into safe harbor retirement plans. This represents a 5% increase over previous safe harbor rules.
The SECURE Act gives small business owners more options when picking retirement plans, financial products, and plan providers as the law makes provision for businesses across different industries to pool together, which in turn gives owners access to larger-scale plans.
Part-time employees have historically had little access to 401(k)s and other retirement plans. The new law changes that by allowing workers with at least 1000 hours of time worked for the year to enroll in a retirement plan. This change has the potential to dramatically alter the retirement planning landscape as more and more people rely on part-time employment.
Under previous rules, 401(k) participants were required to take a minimum distribution of their retirement funds by age 70.5. The age requirement has been bumped back to 72 under the new law, allowing participants more time to contribute to their savings.
The new bill makes provision for employers to begin offering more annuities as part of their retirement package. Because annuities are complex financial products who’s continuing value relies on the strength of the issuing company, SECURE removes liability from small business owners should the annuity fail. This allows you to give your employees more options with confidence.
The SECURE Act stands to make a major impact on the way that small business owners administer retirement plans to their employees. The licensed tax professionals at Foster Financial CPA can assist you with your tax planning and financial strategies to ensure that both you and your employees are gaining the most benefit from the new law. Please contact us today to set up a consultation.