A full count will help us make a better suggestion for your situation. Employees must be age 21 or older to be eligible to participate. Once eligible, all employees will be automatically enrolled in the plan, but they will be able to opt out. The only exceptions are union employees, independent contractors, and nonresident aliens. These employees aren’t eligible for the plan, so you don’t need to include them in your count.
Don’t worry; a ballpark number is fine. This will only be used to estimate costs if you choose to make matching contributions. If you aren’t sure what your employees’ average salary is, just use the pre-filled amount.*
*According to the Bureau of Labor statistics, the median weekly earnings of full-time workers in the U.S. were $936 in the fourth quarter of 2019 (multiplied by 52 weeks for a total of $48,672 per year). Source: https://www.bls.gov/news.release/pdf/wkyeng.pdf
The SECURE Act provides a tax credit for up to 50% of the qualified new plan startup costs paid or incurred by a small business for 3 years.* If you choose to cover the monthly $6 per participant fee as an added benefit to your employees, this will increase the total plan startup costs that may qualify for this tax credit. Consult with a tax advisor or other appropriate counsel for details.
*(1) $500 or (2) the lesser of (a) $250 for each non-highly compensated employee who is eligible to participate in the plan or (b) $5,000.
Automatic enrollment is a plan provision which automatically enrolls participants into the retirement plan at a specified salary deferral percentage unless the participant elects otherwise by completing an enrollment form. This can help increase participation, simplify administration, and help employees save for retirement. As an added benefit, the SECURE Act offers a new tax credit for small businesses implementing automatic enrollment using an eligible automatic contribution arrangement (EACA). It’s $500 annually for 3 years. This is in addition to the plan start-up credit. Consult with a tax advisor or other appropriate counsel for details.
Automatic contribution increases help make saving for retirement easy for your employees.
Business owners have the option to match employee contributions. This not only provides a benefit to employees, but also helps encourage them to participate in the retirement plan. Matching contributions are tax deductible. Learn more about tax deductions at IRS.gov
Contributing to your employees’ retirement is a great benefit to them. There are two ways you can contribute—safe harbor and non-safe harbor. Both options provide tax deduction benefits.
Safe harbor is a type of 401(k) plan that allows you to bypass some of the compliance testing required by the IRS to make sure the plan is fair. In return, you’re required to help your employees save for retirement by making matching contributions to their 401(k) accounts. With safe harbor, you’ll contribute more money, but there’s less paperwork and administrative hassle. With a non-safe harbor plan, you have the option to contribute less, but you can’t bypass compliance testing required by the IRS. Check out the safe harbor resource page for more details.
Match your employee’s contribution:
