A closer look at SECURE 2.0 startup tax credits

SECURE 2.0 meaningfully improves the economics of starting a retirement plan for small businesses, creating a more compelling environment for advisors to recommend new 401(k), SEP and SIMPLE plans. The law adds a new employer contribution credit of up to $1,000 per employee that phases down over five years, alongside an expanded credit that can cover up to 100% of eligible startup and administrative costs, subject to caps. These incentives are most powerful for employers with 50 or fewer workers but can still be substantial for firms with up to 100 employees.

An additional $500 annual credit is available for three years when plans include eligible automatic enrollment features, which are now required for many new arrangements. Together, these credits can offset a large share of early plan costs and contributions, creating a timely opportunity for advisors to help small business owners launch retirement plans while the tax benefits are at their peak.