On Feb. 18, 2020, PrimePay hosted a webinar entitled, “PrimePay's Guide to Retirement Trends.” We discussed current trends in retirement, such as the SECURE Act, and how it impacts your business. View the recording here. With the SECURE Act being heavily touched on in this webinar, we wanted to reiterate some valuable information. Below is an excerpt from our previous blog titled, “Current Trends in Retirement Planning for Your Small Business”.
President Trump signed a year-end spending bill that implemented the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. It is widely regarded as the most significant piece of legislation to affect retirement plans in a long time, and it passed very quickly through Congress.
The bill modifies the requirements of employer-provided retirement plans and Individual Retirement Accounts (IRA) to make retirement plans more appealing for most employers and individuals. It helps to alleviate the six issues below.
1. Ability to pool plans.
Small businesses can pool together to create Pooled Employer Plans’ (PEPs) just like businesses pool together to offer health care. The small businesses can be in different states and different industries and still come together to offer a retirement plan.
This bill protects businesses from penalties for other members’ violations and has certainly increased the appeal for employers to join a multiple employer plan.
2. New tax credits.
If you were a business that did not have a retirement plan and now implemented a new retirement plan, you have an opportunity to earn up to $5,000 per year for up to three years. This was previously a $500 tax credit.
There is also an additional $500 tax credit you will receive when your business adopts an automatic enrollment for the plan. Automatic enrollment is when a new hire is automatically enrolled in a retirement plan.
3. Small business flexibility.
Many of the rules for 401(k)s and retirement plans are rigid and restrictive. Once you've started for the year, you cannot make any changes. This new bill will allow for provisions to include mid-year changes and relax some of the restrictions that have turned business owners away in the past.
4. New annuity-based rules.
The bill also provides new safe harbor provisions that will allow you to select an annuity as a retirement plan option.
5. Greater flexibility with part-time employees.
The current threshold for eligibility for part-time employees is 1,000 hours of service in a year. Under the legislation, that number will be reduced to 500 hours per year over three consecutive years. They recognized that many employers have great long-term, part-time employees that would enjoy the benefit of being offered a retirement plan.
6. Removal of age limitations on IRA contributions.
Currently, traditional IRAs bar contributions once the account holder hits 70.5 years old. By removing this age limit, it provides for a greater amount of options for these individuals to be able to contribute even outside of the retirement plan they may have with their employer.
The bottom line is that many employers will benefit from their employees having access to a vehicle that will enable them to save money.
Ready to offer your employees retirement plan options?
Offering your employees a way to plan for retirement is a key component they want as part of their benefits package. As a small or mid-size business, a retirement benefits plan helps you attract and retain quality, talented employees.
You may want to consider the 6 key areas discussed above when deciding which plans you want to offer your employees. See our previous blog titled “A Dollar a Day in the 401(k): The Basics” for more insight.
Enhance your benefits offering with PrimePay.
PrimePay has a passion for retirement plans. We have put forth a very strong offering for employers of all sizes. We offer retirement plan solutions that can be as low as $30 a month. We have a vast offering and it is customized to fit every employer’s needs.
PrimePay’s Retirement Plan Services include:
- Personal Design & Implementation of the Plan
- Open Enrollment Support
- Mutual Fund Monitoring & Reporting
- Signature-ready Form 5500 for Year-end Reporting
- Daily Processing & Movements of Contributions
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Disclaimer: Please note that this is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan.