How the SECURE Act May Affect Your Business

Attracting top-notch employees is a big challenge for small business owners. After all, you’re competing for the same talent alongside Fortune 500 companies that offer lucrative benefits packages in addition to alluring perks, such as “pawternity” leave, nap pods or arcade lounges.

But those Silicon Valley-esque perks, generally, aren’t must-haves for jobseekers. Truth is, people are more pragmatic, ranking health insurance, paid time off and a retirement savings plan as their top-three, must-have benefits in survey after survey. Fortunately for business owners, offering employees a retirement plan, one of those bread-and-butter benefits, is getting easier.

THE SECURE ACT

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) is the largest overhaul of retirement rules in well over a decade. Broadly speaking, the legislation updates a host of rules to better reflect the new demographics of retirement, broadens employee access to retirement plans and makes it simpler to offer plans to employees. President Trump signed the bill into law Dec. 20.

As a business owner, here’s what you should know about how the SECURE Act may affect your business and ways you incentivize employees.

EASIER TO OFFER A PLAN

The SECURE Act makes it easier for employers to band together and offer a single retirement plan. Employers are currently allowed to offer so-called multiple employer plans (MEPs), but only if they share a common economic or representational interest, such as a trade association or professional employee organization. The SECURE Act removes this restriction, which has been blamed for holding back wider adoption of MEPs. Additionally, the legislation cuts regulations, streamlines reporting requirements and reduces liability exposure for businesses participating in a MEP.

TAX CREDITS EXPANDING

The new law boosts the tax incentives available to employers for offering retirement plans. The tax credit available for starting a plan could jump to as much as $5,000. Small businesses with up to 100 employees that include automatic enrollment (or convert an existing plan to an auto-enroll) in qualified retirement plans could take an additional credit of $500 per year for up to three years.

SAFE HARBOR FOR EMPLOYERS

The SECURE Act encourages employers to offer annuities in their 401(k) plans as a way for workers to build lifetime income streams. Many companies have hesitated to add annuities to their 401(k)s since they could be held liable if the annuity provider can’t make payments as promised. The new law grants employers a “fiduciary safe harbor” when choosing an annuity provider. So long as employers follow a set of guidelines, they can be shielded from future liability.

TIME TO ADD PART-TIME EMPLOYEES TO THE PLAN

Under the SECURE Act, employers are required to offer retirement plans for part-time employees who meet certain work requirements. Workers who have at least 500 hours of service for three consecutive years are eligible to participate in the company retirement plan. However, the law doesn’t require these employees be made eligible for the plan’s matching or profit-sharing contributions.