SECURE ACT 2.0: A Top 3 Factor in the Demand for Retirement

As a retirement plan advisor, it’s your duty to provide retirement options that suit the needs of your clients. Small business retirement plans are in high demand because business owners are realizing that these plans are the total retirement plan package: satisfying newly implemented state retirement savings mandates, helping to attract and retain new employees, and providing tax breaks as detailed in the enhanced SECURE Act 2.0.

Let’s explore the plan benefits closer so you can understand why small business retirement plans are necessary for your clients and for the success of your business.

Key Takeaways:

• More and more states are mandating that business owners offer a retirement savings program for their employees.
• Job seekers tend to find businesses that offer a retirement plan more attractive than others.
• Starting a new plan can also mean valuable tax breaks for employers.

1. State retirement savings mandates

Millions of American workers in the private sector do not currently have access to retirement plans. To remedy this crisis, several states have mandated participation in a state-administered retirement program or a qualifying alternative, such as an ePlan Services 401(k) plan.

Most of these states offer IRA options. But compared to an IRA, a 401(k) plan offers advantages such as higher contribution limits for plan participants, employer matching and profit-sharing options—which are non-existent with IRAs—and tax breaks for employers (which we’ll discuss in greater detail later).

With retirement savings mandates in place and deadlines for state IRA enrollment just around the corner, employers need a qualifying retirement plan that can give them more bang for their buck, and in a hurry. That’s where you, their seasoned advisor, come in!

Rather than offering your business-owner clients a basic IRA that meets state requirements, you can provide them with access to a small business retirement plan that will provide valuable tax breaks, help their employees save more money for retirement, and meet their state’s requirements.

2. Employee attraction and retention

To attract new employees and retain current ones, your business-owner clients need an easy-to-establish small-business retirement plan.

Job seekers are more likely to apply to a workplace that offers attractive benefits—most importantly, a 401(k). According to a 2020 Small Business Employee study conducted by ClearlyRated and Paychex, 94% of employees are interested in a 401(k) plan, second only to health insurance.

Small business employers can entice potential new employees with a 401(k) retirement account option, complete with auto-enrollment and easy payroll integration features. Plus, with features like employer matching or profit sharing, current employees will feel empowered and motivated to save for retirement.

3. SECURE Act 2.0 tax breaks for employers¹

If state mandates weren’t enough to encourage employers to enroll their company in a retirement plan, SECURE Act 2.0 provides even more attractive incentives such as tax breaks for employers. These tax breaks include a: · Startup credit – Employers with 50 or fewer employees may be eligible for a tax credit of 100% of their startup costs for providing a company-sponsored 401(k) plan. Those with 51-100 employees may be eligible for a credit of 50%. · Employer contribution credit – Employers with no more than 100 employees are eligible. The maximum credit is equal to a percentage of employer contributions capped at $1,000 per employee. · Auto-enrollment credit- Employers who provide an auto-enrollment option in their 401(k) plan may be eligible for a credit of $500 per year for the first three years they offer it.

Conclusion

Small business owners are no longer seeking large retirement firms that will lose their accounts in the shuffle. They want a plan that’s worth their time, easy to manage, and provides value. Small business retirement plans are not only necessary, but they are also in demand because of beneficial tax breaks presented by SECURE Act.

Position yourself as a leader in retirement and financial planning services by providing the most in-demand retirement plan option around. Don’t miss out on a prime opportunity to provide a retirement plan that your business owner clients are desperately seeking.

^{1 Potential SECURE Act Tax Credits include: $5,500/yr. for the first 3 years for new plans with auto-enrollment and up to $1,000/yr. per employee over 5 years with employer contributions for businesses with 100 or fewer employees.}