Are you interested in saving money on your tax bill while helping your workers become financially secure? A new law called SECURE Act 2.0 is making retirement saving easier for employees and employers.

Through SECURE Act 2.0, employers can get tax credits by offering 401(k) benefits for employees. After you learn how to set up a 401(k), the next step is figuring out how to educate your workers on what to expect with their 401(k) benefit plans. By being transparent, you can encourage more workers to sign up for your employer-sponsored plan. 

How Does SECURE Act 2.0 Impact Employers? 

SECURE Act 2.0 was passed at the end of 2022. With this law, the federal government is trying to fill a gap in retirement savings. Workers are significantly less likely to save if they don’t have a workplace plan. For employers, SECURE Act 2.0 offers a number of advantages

Administrative credits: Workplaces with less than 50 employees can receive an administrative credit of $250 per employee. The maximum amount you can claim is $5,000. This credit is for the cost of setting up retirement accounts for your workers. It covers most types of setup costs, including hiring a consultant to teach you how to set up a 401(k) and paying an advisor to educate your workers.

Auto-enrollment credits: You’re required to use auto-enrollment on new plans, but you can also get an incentive for adding auto-enrollment to your current plans. For the first three years, you can get an annual $500 credit for using auto-enrollment. 

Roth elections: Under SECURE Act 2.0, workers can choose to make certain matching and non-elective contributions into Roth contributions. 

401(k): The new plan offers tax credits for contributing to 401(k) benefits for employees. As an employer, you can get up to $1,000 per employee. You receive 100% of your contribution in years one and two, 75% in year three, 50% in year four, and 25% in year five. After the fifth year, the credit goes away.

What Is a 401(k) Going to Do for Small Business Owners? 

In Mission to Grow’s recent podcast, “401K Tax Savings for Small Businesses: Real World Examples,” the director of plan design consulting at Vestwell, Kevin Gaston, spoke about how the new 401(k) rules are incredibly important for American workers. 

“If you have a workplace retirement plan, you’re 15 times more likely to use it to retire than an IRA,” Gaston says. In fact, the 401(k) “has become the majority of people’s wealth in this country. If you have money for retirement, it’s probably through a workplace savings vehicle.” 

Learning how to set up a 401(k) isn’t just important for workers. It can also benefit employers. By setting up 401(k) benefits for employees, your company can enjoy some of the following advantages. 

  • Decrease turnover rates.
  • Have an easier time attracting job applicants. 
  • Increase tenure at your company. 
  • Alleviate financial instability and stress among your workers. 
  • Reduce your tax bill through credits and deductions.

SECURE Act 2.0 and Your Workers 

What is 401(k) going to be like with SECURE Act 2.0 for workers? And how should you teach workers about your new plan? 

SECURE Act 2.0 is a law that applies to everyone, so your plan provider will likely include information about SECURE Act 2.0-related ages, 401(k) employee contribution options, how to set up a 401(k), and other information. However, there are a few special topics you should plan on covering with your employees to avoid any confusion.

Student Loan Repayment Benefits

From an employee perspective, student loan benefits may be one of the most important topics to cover. Under SECURE Act 2.0, the amount employees pay for a qualified student loan can count for matching contributions from employers. 

For example, Worker A can pay $500 in student loan payments during the year. Then, their employer can add a matching contribution to their 401(k). 

SECURE Act 2.0 made this modification to student loan payments because so many workers are delaying retirement savings in order to prioritize student loans. By making this adjustment, SECURE Act  2.0 can assist workers who are overwhelmed by student loan debt. 

When you talk about 401(k) benefits with your workers, make sure to explain how student loan repayments impact their matched contributions. You may also want to ask your plan provider about how these benefits will work in practice. 

Auto-Enrollment Features 

Since 401(k) benefits for employees were initially developed, behavioral scientists have learned a lot about human motivation and how to nudge people to make better choices. This knowledge has been incorporated into SECURE Act 2.0’s features.

One major example of nudges in action is SECURE Act 2.0’s auto-enrollment features. Instead of opting into 401(k) employee contributions, employees have to opt out. The same is true for automatic increases in the percentage an employee chooses to contribute. 

The initial automatic contribution is at least 3% and less than 10%. Then, this amount increases by 1% each year until it tops out at least 10% but less than 15%. 

Most of the time, employees don’t notice the automatic increases in their savings rate. However, it’s important to be clear about auto-enrollment for 401(k) to avoid any confusion among your workers. If they do want to opt out, there are plenty of opportunities to do so.

30-Day and 90-Day Deadlines for Mistakes

If workers accidentally pay a 401(k) employee contribution, there are ways to remedy this mistake. Initially, workers have 30 days to decide whether they want to take part in the plan and how they want to take part in it. 

Even after this 30-day window passes, your employees can still get an Enhanced Automatic Contribution Arrangement (EACA) refund. EACA refunds are available for 90 days after the 30-day deadline, so your employees have plenty of time to get a refund of any unintentional contributions. 

How to Educate Workers on SECURE Act 2.0 Provisions and Employee Retirement Accounts 

When learning how to set up a 401(k) for your workers, you should focus on communication. Training your employees on their benefits can help simplify the sign-up process and prevent misunderstandings. 

1. Use the Administrative Tax Credit 

As you educate your team members on 401(k) benefit options, track how much you spend. Many of these educational expenses could count as setup costs, which would be covered under SECURE Act 2.0’s administrative credits. 

2. Pay a Consultant or Advisor 

To simplify 401(k) employee education, consider bringing in a paid consultant or advisor. Not only is this expense likely covered under the administrative tax credit, but they’ll have a better understanding of SECURE Act 2.0’s nuances.

3. Communicate Clearly 

No matter how you decide to explain 401(k) benefits to your workers, it’s important to be clear. You may want to incorporate materials from your 401(k) provider into your discussions so that workers have something to refer to later. At the end of any 401(k) education session, save time for employees to ask questions and get clarification.

4. Make It Easy 

Employees are going to have varying levels of knowledge about 401(k) plans. Try to make 401(k) information as easy to understand and accessible as possible. 

5. Use Materials From the Plan

One of the easiest ways to explain 401(k)s benefits for employees is by using materials from the actual plan. You can also see if your 401(k) provider has any tutorials or videos available. 

6. Be Proactive 

It’s important to be as transparent as possible about what your small business 401(k) plan entails and what workers can expect. SECURE Act 2.0 and other legislation give employers many different credits and deductions for offering retirement accounts. These accounts are generally a win-win for employees and employers, but workers can sometimes get confused. 

For example, you should talk to employees in advance about auto-enroll features so that they know how to opt out. You may also want to review the starting percentage for contributions and how much the automatic increases will be each year. 

Get Tax Breaks by Learning How to Set Up a 401(k)

As a business owner, learning how to set up a 401(k) opens you up to a range of tax benefits. For the plan to be as effective as possible, you also need to educate workers on 401(k) benefits for employees and how to make a 401(k) employee contribution. 

Are you ready to help your workers save for retirement? For more information about your 401(k) benefit options and employee education, reach out to our small business payroll and HR experts today. 


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