Expert insight with contributor Don. S. Clardy
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. Following are some highlights about how it could affect your business.
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 criteria. 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.
The SECURE Act has several other applications as well, such as lifting the age cap for IRA contributions and extending the age at which required minimum distributions must begin, so I recommend talking with a financial advisor to learn how this act will impact your family today.
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.
TAX CREDITS EXPANDING
The 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 earn 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. Previously, many companies 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.
Don S. Clardy is a wealth management advisor with the Greenville office of Northwestern Mutual. To contact Don S. Clardy visit his website at donclardy-nm.com.
