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What Business Owners Need to Know About the SECURE 2.0 Act

  • Oppenheimer & Co. Inc.
  • March 15, 2023

Did you know that workers are 12 to 15 times more likely to save for retirement if they have access to a retirement savings plan at work? Yet, according to studies, more than 40% of full-time private-sector workers lack access to an employer-provided retirement savings plan1.

small business owner

New legislation in the SECURE 2.0 Act aims to change this picture by expanding retirement plan coverage, increasing retirement plan savings, and simplifying and clarifying plan rules. These include:

Tax Credits

The credit is a complete offset of the startup administration costs for the first three years of a new plan’s establishment. The Act increases the credit from 50% to 100% for employers with up to 50 employees (employers with 51-100 employees still receive a 50% credit), although dollar limitations apply such that no more than $5,000 may be credited annually.

An additional credit is now made available that is a percentage of what is contributed by the employer on behalf of employees, up to a per-employee cap of $1,000. This 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% in the first and second years, 75% in the third year, 50% in the fourth year, 25% in the fifth year – and no credit for tax years thereafter.             

Roth Contributions for SIMPLE IRAs

Starting in 2023, taxpayers will be allowed to make ROTH contributions to Simple IRAs. In addition, employers may allow employees to treat employee and employer Simplified Employee Pension (SEP) contributions as Roth – in whole or in part. Updates to plan documents, regulations, and guidance for administration will be necessary before these Roth contributions may be made.

Matching Contributions

Employers with defined contribution plans (e.g. 401(k) and profit sharing) may allow participants to receive matching and profit sharing contributions on a Roth basis.

An Option for Roth Treatment of Matching or Non-elective Contributions

An employer may establish a new 401(k) plan after the end of the taxable year, but before the employer’s tax filing date. Employer contributions may be made up until the tax filing date, but when sponsored by an individual who is a sole proprietor or otherwise taxed as self-employed, the salary deferral for the individual may be made up until tax filing date as well.

Are you a business owner who is in need of help navigating these SECURE 2.0 Act changes? Oppenheimer Financial Professionals can help answer your questions or even set up a retirement savings plan for your business. Contact one today.


Source: 1AARP Public Policy Institute

The information provided herein is general in nature for informational purposes only and does not represent legal or tax advice. Oppenheimer & Co. Inc. does not provide legal or tax advice. The material herein has been obtained from various sources believed to be reliable but does not purport to be a complete statement of all material facts relating to the strategy or investments types discussed. Contact your legal or tax advisor for specific advice regarding your circumstances.