Tag Archives: contribution

The SECURE Act 2.0: The Most Impactful Provisions #11 — The Saver’s Match for Low Income Workers


SECURE 2.0
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Key Takeaways

    • In the past, and for the next few years, the Internal Revenue Code provides for a nonrefundable tax credit for low-paid individuals who make plan, IRA or ABLE contributions. Unfortunately, that credit was seldom claimed on tax returns, possibly because of a lack of awareness among low-paid taxpayers.
    • However, under SECURE Act 2.0—beginning in 2027—the tax credit will become refundable, but not to the individuals. Instead, the Federal government will deposit matching contributions into the IRAs and plan accounts of those individuals.
    • The administrative complexity of depositing the Federal matches into those IRAs and plan accounts is significant. Nonetheless, it is an effort by Congress to help the lowest paid workers in the country–or at least to help those who make enough money to contribute into their IRAs and plans.
    • However, for workers who don’t earn enough to have disposable income to put into their IRAs or plans, this change doesn’t address their circumstances.

The President signed the Consolidated Appropriations Act, which included SECURE Act 2.0, on December 29, 2022.

SECURE Act 2.0 has over 90 provisions, some major and some minor; some mandatory and some optional; some retroactively effective and some that won’t be effective for years to come. One difference between the SECURE Act 2.0 and previous retirement plan laws is that many of 2.0’s provisions are optional…that is, plan sponsors are not required to adopt the provisions, but can adopt them if they decide that the change will help their plans and participants. This series discusses the provisions that are likely to be the most impactful, either as options or as required changes.

This article discusses the provision that is, in my opinion, the most unique in SECURE 2.0. It is one of the mandatory provisions, but it doesn’t become effective until 2027, probably because of the considerable changes needed to implement and administer the provision. Section 103 of SECURE 2.0 creates a “Saver’s Match” for low-income workers to be funded by the Federal government.

Continue reading The SECURE Act 2.0: The Most Impactful Provisions #11 — The Saver’s Match for Low Income Workers →

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The SECURE Act 2.0: The Most Impactful Provisions #7—Tax Credits for Administrative and Contribution Costs for New Plans for Small Employers (Part 2)


SECURE 2.0
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Key Takeaways

  • The SECURE Act 2.0 provides significant tax credits for startup plan costs—for both administration and contribution costs.
  • The credits are fully available for employers with 50 or fewer employees and partially available up to 100 employees.
  • This provision is effective now, that is, it is effective for tax years beginning after December 31, 2022 (in 2023 for calendar year taxpayers).

The President signed the Consolidated Appropriations Act, which included SECURE Act 2.0, on December 29, 2022.

SECURE Act 2.0 has over 90 provisions, some major and some minor; some mandatory and some optional; some retroactively effective and some that won’t be effective for years to come. One difference between the SECURE Act 2.0 and previous retirement plan laws is that many of 2.0’s provisions are optional…that is, plan sponsors are not required to adopt the provisions, but can if they decide that the change will help their plans and participants. This series discusses the provisions that are likely to be the most impactful, either as options or as required changes.

This article and the next one discusses the “optional” provisions that provide significant tax credits for startup plans for small employers. The Senate Finance Committee’s summary of the provision explains:

Section 102, Modification of credit for small employer pension plan startup costs. The 3-year small business startup credit is currently 50 percent of administrative costs, up to an annual cap of $5,000. Section 102 [of the Act] makes changes to the credit by increasing the startup credit from 50 percent to 100 percent for employers with up to 50 employees. Except in the case of defined benefit plans, an additional credit is provided. The amount of the additional credit generally will be a percentage of the amount contributed by the employer on behalf of employees, up to a per-employee cap of $1,000. This full additional credit is limited to employers with 50 or fewer employees and phased out for employers with between 51 and 100 employees. The applicable percentage is 100 percent in the first and second years, 75 percent in the third year, 50 percent in the fourth year, 25 percent in the fifth year – and no credit for tax years thereafter. Section 102 is effective for taxable years beginning after December 31, 2022.

My last post (SECURE Act 2.0 #6 (Part 1)) covered the expanded tax credit for start-up  costs; this one covers the tax credit for employer contributions.

Continue reading The SECURE Act 2.0: The Most Impactful Provisions #7—Tax Credits for Administrative and Contribution Costs for New Plans for Small Employers (Part 2) →

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The SECURE Act 2.0: The Most Impactful Provisions #6 – Tax Credits for Administrative and Contribution Costs for New Plans for Small Employers (Part 1)


SECURE 2.0, SECURE Act
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Key Takeaways

  • The SECURE Act 2.0 provides significant tax credits for startup plan costs—for both administration and contribution costs.
  • The credits are fully available for employers with 50 or fewer employees and partially available up to 100 employees.
  • This provision is effective now, that is, it is effective for tax years beginning after December 31, 2022 (in 2023 for calendar year taxpayers).

The President signed the Consolidated Appropriations Act, which included SECURE Act 2.0, on December 29, 2022.

SECURE Act 2.0 has over 90 provisions, some major and some minor; some mandatory and some optional; some retroactively effective and some that won’t be effective for years to come. One difference between the SECURE Act 2.0 and previous retirement plan laws is that so many of 2.0’s provisions are optional…that is, plan sponsors are not required to adopt the provisions, but can if they decide that the change will help their plans and participants. This series discusses the provisions that are likely to be the most impactful, either as options or as required changes.

This article and the next one discusses the “optional” provisions that provide significant tax credits for startup plans for small employers. The Senate Finance Committee’s summary of the provision explains:

Continue reading The SECURE Act 2.0: The Most Impactful Provisions #6 – Tax Credits for Administrative and Contribution Costs for New Plans for Small Employers (Part 1) →

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