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Rochester

1214 North Main Street

Rochester, MI 48307

(248) 601-9500

 

Lapeer

951 S. Main Street, Suite 3

Lapeer, MI 48446

(810) 664-4470

May 2020

Business Security

Business Security

In last month’s ClientLine, we highlighted some of the Setting Every Community Up for Retirement Enhancement (SECURE) Act’s new headlines for business owners. This month, we share some of the details for you:


GREATER ACCESS
For the first time, small businesses can join a pooled employer retirement plan with two or more unrelated employers. Part-time employees will have more access, too: those who worked at least 500 hours in three consecutive years are newly eligible for qualified plan participation, but they don’t factor into existing top-heavy requirements.


ENHANCEMENTS
Employers will see other reasons to start a plan. The startup tax credit for newly established plans increased significantly, from the former cap of $500 up to $5,000. Eligible 401(k), SIMPLE IRA and other qualified plans can take another $500 credit for three years for auto-enrolling new employees. The safe harbor for the automatic enrollment escalation cap rises from 10% to 15% of pay, while certain penalties for failing to file plan returns increase.


ANNUITY SAFE HARBOR
Plan sponsors will find more streamlined administrative and compliance requirements, while they also have a new annuity safe harbor, which will protect employers from liability if the annuity provider they choose meets certain standards involving state insurance licenses, audited financial statements and adequate reserves.


Employers should also be aware of a change that benefits individual participants: an increase in the age when required minimum distributions must begin, from 70 1/2 to 72. This change applies only to people who reach age 70 1/2 in 2020 or later. Employees older than age 72 may continue contributing to employer plans.


Talk to your tax professional to learn how these changes might affect your company’s tax situation.


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