Push those tax credits

When prospecting potential clients that are considering a new 401(k) plan, push those tax credits if they qualify. The SECURE Act made some significant changes and upgrades, that they should be considered and discussed.

For 2020, the credit is now equal to 50% of eligible expenses, subject to a minimum credit of $500 and a maximum credit of $250 per eligible non-highly compensated employee (capped at $5,000) over a three year period.

To claim the credit, the potential plan sponsor must meet the following requirements:

  • The expenses must be related to the plan’s establishment, administration, and/or participant education,
  • The client can’t have sponsored a plan at any time in the immediately preceding three years,
  • At least one plan participant must be a non-highly compensated employee; and,
  • The employer must have 100 or fewer employees with at least $5,000 in compensation in the preceding year.

In addition, there is also a new $500 per year tax credit for up to three years for small employers that adopt new plans that include automatic enrollment.


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