The SECURE Act of 2019 and SECURE 2.0 Act of 2022 created some of the most generous small business tax credits available—yet a majority of eligible businesses are not claiming them. The startup credit alone can cover up to $5,000 per year for the first three years of a new retirement plan.
The Retirement Plan Startup Credit
Small businesses with 100 or fewer employees that start a new retirement plan—a 401(k), SIMPLE IRA, or SEP-IRA—can claim a credit of up to $5,000 per year for each of the first three years. For businesses with 50 or fewer employees, the credit is 100% of eligible startup costs (up to $5,000). For 51-100 employees, it is 50%.
The Employer Match Credit
SECURE 2.0 added a new credit for small employers that add an automatic enrollment feature to their retirement plan. The credit equals a percentage of employer matching contributions made to employees with compensation under $100,000—up to $1,000 per employee.
Key Takeaways
- The retirement plan startup credit covers up to $5,000/year for 3 years—for a potential $15,000 per plan.
- Businesses with 50 or fewer employees can get 100% of startup costs covered.
- SECURE 2.0 also added a new employer match credit—up to $1,000 per employee.
