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Are CPAs Ready to Advise on the SECURE Act?


As accountants meet with their small business clients, it’s essential that they provide strategic counsel on how the SECURE Act impacts their business and how they can better take advantage of the new provisions to attract and retain talent.

Mar 6th 2020
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While not all-encompassing, the SECURE Act does offer a lot of small business financing for those that want to deliver comparable retirement options for existing and prospective employees. 

As senior vice president of ADP retirement services, I’m constantly speaking with small business owners across the country about retirement plans and the challenges they face in affording and managing retirement programs for their employees.  As the labor market remains increasingly competitive, many small businesses are losing out on quality talent to bigger companies that can offer more comprehensive benefits and retirement packages.

To that end, I believe that the newly-passed SECURE Act is a much-needed step in leveling the playing field and enabling more small business employees to gain access to the best retirement tools possible. On December 20, 2019, the SECURE Act (short for “Setting Every Community Up for Retirement Enhancement”) was signed into law as part of the government’s annual spending bill. 

The Act itself contains significant retirement legislation with the overall goal of increasing affordability and accessibility to employer-sponsored retirement plans for small businesses while helping all Americans save for retirement.  With its enactment, I believe this legislation will help businesses gain access to cost effective and easier to manage retirement plan solutions helping to make their benefits offerings more competitive. 

As accountants across the country initiate related discussions with their small business clients, it’s essential to communicate the following benefits:

Open MEPS on the Rise in 2020

Prior to the passage of the SECURE Act, the Department of Labor guidance generally prevented unrelated employers from participating in a singular plan.  Now, under the new legislation, unrelated employers will be able to participate in a new type of multiple employer plan (MEP) called a “Pooled Employer Plan.” This new plan type will provide more employers with access to affordable retirement plan options. Of note, there a few key points related to MEPs for all businesses to be aware of:

  • The new MEP will be treated as a single plan under ERISA
  • MEP must be sponsored by a Pooled Plan Provider (PPP)
  • The PPP must serve as the plan’s administrator and fiduciary

The amendment of “one-bad-apple” rule prevents the disqualification of a MEP based on one employer’s qualification issue or mistake.

New Retirement Plans Get a Boost

Another key advantage to small business owners with this new legislation is the adoption of more generous tax credits. Previously, small businesses (up to 100 employees) could receive a nonrefundable tax credit on a new retirement plan of 50 percent of the plan’s administrative cost up to $500 per year for the plan’s first three years. 

The SECURE Act increases that credit to the greater of $500 or $250 per eligible employee (up to $5,000 maximum), not including those who are considered ‘highly-compensated.’ Taking advantage of the plan start up tax credit can return valuable dollars to small business owners.

Automatic Enrollment Credit

Previously, one of the biggest challenges faced by small businesses was a lack of incentive to drive automatic enrollment in retirement plans. In fact, only 26.2 percent of plans with less than $5 million in assets opt for automatic enrollment according to PLANSPONSOR’s 2019 Defined Contribution Survey. 

To help encourage good retirement outcomes for workers, the SECURE Act contains a provision that allows small employers who adopt auto enroll in their new plan (and meet certain special notice and uniformity requirements) to receive a $500 tax credit per year for three years.

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