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401(k) plan costs and potential savings calculator

If you're a small business considering launching a 401(k) plan, you might qualify for tax credits. Utilize the calculator provided to gauge the costs of initiating a new 401(k) for your business, along with your possible savings!

Your 401(k) cost and savings estimate

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Annual Tax Credits
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Additional tax benefits
You may be able to benefit from tax deductions on your employer contributions up to $1,000 per employee, for the first 2-5 years of the plan.
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Secure 2.0 Details

Automatic enrollment

Employers adopting new SIMPLE, 403(b), or 401(k) plans are now required to include an auto-enrollment feature that sets participants up to contribute 3% of their total compensation toward retirement each year. These contributions will automatically increase by 1% per year to a maximum of 10%.

Employees still retain the right to opt out if they desire, though very few workers actually do. Existing plans will be grandfathered, meaning nothing has to change at the moment.

Non-exempt 401(k) plans established by December 29, 2022 must include automatic enrollment by December 1, 2025.


The original SECURE Act required that long-term, part-time workers become eligible for retirement plan participation if they have worked 500+ hours per year over the last three plan years, starting in 2021. Secure 2.0 goes one step further, shortening the period from three to two years, beginning in 2025.

Required minimum distributions (RMDs)

Previously, Americans age 72 and older must begin taking distributions from their retirement plans. This age increased from 70.5 under the original SECURE Act, starting in 2020. However, over a quarter of seniors ages 65-74 are still participating in the workforce, as well as 6.6% of those age 75 and older.

But now under Secure 2.0, Americans may delay taking distributions in the following ways:

For individuals who reach age 72 after December 31, 2022, and reach age 73 before January 1, 2033, they must start taking distributions at age 73
For individuals who reach age 74 after December 31, 2032, they must start taking distributions at age 75

Catch-up contributions

Many people want to contribute more as retirement draws near. Participants in 401(k) and 403(b) plans are able to make additional catch-up contributions of $7,500 starting at age 50. This helps late starters save quicker, above and beyond the annual limit.

Beginning in 2025, plan participants will have the option to increase catch-up contributions from the current $6,500 to $10,000 per year for those ages 62, 63, and 64. At age 65, the $6,500 allowance returns. These figures may be adjusted for cost-of-living increases.

Roth options

Effective January 1, 2024, participants with over $145,000 in income will only have the option to contribute their catch-up as Roth – meaning that plan participants pay taxes on them now, but pay no taxes at withdrawal time.

Effective immediately upon adoption, plan sponsors may offer employees the option to put their matching contributions into Roth accounts.

Multiple employer plans

While the original SECURE Act made it easier for small business employers offering 401(k)s to band together in a single plan, Secure 2.0 makes 403(b) plans eligible to participate in Multiple Employer Plans (MEPs). Professional service providers take over the administrative burden, rather than individual employers.

Saver’s credit

The Retirement Savings Contributions Credit (Saver’s Credit) gives low and middle-income individuals a tax credit worth up to $1,000 for making eligible contributions to an employer-sponsored retirement plan or IRA. Secure 2.0 raises the rate of the credit to 50% of what is contributed, regardless of income level, and increase the maximum credit to $1,500.

Plan administration costs

Certain plan objectives are aimed at simplifying administration to reduce total plan costs. Certain disclosure requirements are eased under the new proposal. Excise taxes for failure to make RMDs are reduced from 50% to 25%. The IRS Employee Plans Compliance Resolution System has been expanded and the requirements for recouping accidental overpayments have changed slightly.

Small business tax credits

A tax credit worth 100% of the employer’s administrative expenses (to a maximum of $5,000) for the first three years is available for small business retirement plans with 50 or fewer participants. This is changed from the previous tax credit of 50% of the administrative costs (also capped at $5,000).

A brand-new tax credit for enterprises with 50 or fewer workers allows them to receive up to 100% of the amount they contribute on each employee’s behalf – capped at $1,000 per person. Businesses with 51-100 employees would receive a tax credit worth 100% of their contributions per employee in the first and second years, 75% in the third year, 50% in the fourth year, and 25% in the fifth year.

The $500/year auto-enrollment tax credit still applies for the first three years of a new plan as well.

Lost benefits

Within three years of enactment of Secure 2.0, the Labor, Treasury, and Commerce departments will coordinate a searchable database for lost participant benefits. This publicly searchable repository of last resort for lost, uncashed retirement distribution checks could be a way for people to locate missing money they’d lost or forgotten about when changing jobs.

Secure 2.0 has increased the cap on mandatory distributions from $5,000 to $7,000. Under current rules, beneficiaries with accounts worth over $5,000 must consent to a distribution – either through a direct rollover to another account or a cash check. If the value is worth more than $1,000 and consent is not given, the benefit must be transferred to an IRA or other investment vehicle as designated by the plan administrator. With Secure 2.0, these smaller balances can be transferred to the Office of the Retirement Savings Lost and Found in the event a non-responsive participant cannot be reached to accept the distribution.

Want to talk to a retirement expert? Get a free consultation
Want to talk to a retirement expert? Get a free consultation

Frequently asked questions

Did the SECURE Act increase tax credits for small businesses?

Yes, the SECURE Act increased the amount of available tax credits for small businesses as an incentive to start a new 401(k) plan for their employees or increase participation through auto-enrollment. Before the SECURE Act was passed, a business could claim 50% of the qualified startup costs, up to $500 maximum – for a maximum of $1,500 over three years. When combined, the new tax credits can total up to $5,500 per year — or $16,500 for the first three years of the 401(k) plan.

How to claim the SECURE Act tax credits?

These credits are subtracted from the total federal income tax owed on IRS Form 8881.

Is my small business eligible for a SECURE Act 401(k) tax credit?

To be eligible for the SECURE Act tax credit, a small business must meet three requirements:
- Have 100 or fewer employees earning at least $5,000 in compensation within the last year.
- Cover at least one Non-Highly Compensated Employee with the 401(k).
- Have plan participants who did not contribute to a retirement plan with the same employer, or a predecessor company, within the past three tax years.  

What Is a Non-Highly Compensated Employee (NHCE)?

For tax purposes, an NHCE is a plan participant who:
-Does not own more than 5% of interest in the business during the preceding year.
-Received less than $150,000 in compensation in 2023 (this figure adjusts annually).
-Did not rank in the top 20% of employees by compensation within the last year.*

*This only applies to plans that have the top paid provision in their Ubiquity plan document. Reach out to your plan sponsor or consult your plan documents to confirm your plan’s specific setup.

Do Solo 401(k) plans qualify for SECURE Act tax credits?

No, solo 401(k) plans do not qualify for SECURE Act tax credits, as they do not cover non-HCEs. By nature, a solo 401(k) covers only the business owner and their spouse. However, one noteworthy SECURE Act change affecting solo 401(k) plans is that self-employed business owners can file to establish their plan later – at the tax filing deadline with extensions, rather than on the last day of the plan year.

Does the SECURE Act affect required minimum distributions?

The SECURE Act of 2019 changed the rules for Required Minimum Distributions by increasing the age at which you must begin taking money out of your retirement account. The details are as follows:

- Age Requirement: If you were born on or after July 1, 1949, your first RMD will be the year you turn 72. If you were born prior to that date, the age remains 70½.

- Calculation Method: RMDs are calculated by dividing your 401(k) balance as of December 31 of the previous year by your life expectancy factor, which is taken from the IRS Uniform Lifetime Table.

Flexibility in Fulfilling RMD Obligations

There are several options when it comes to fulfilling your RMD obligations:

- Multiple 401(k)s: If you have multiple 401(k) accounts, you must calculate the appropriate RMD for each account individually.

- IRAs: For IRAs, you have the option to take the total RMD amount from one account or distribute it among several.

- Withdrawal Options: You can opt for a one-time withdrawal or set up automatic distributions from eligible accounts.*

- Reinvestment: After withdrawing your RMD, you are not required to spend it. You can choose to reinvest the funds in a taxable account.

- Tax Implications: Withdrawn RMDs are taxed as regular income by federal, state, and local governments for that year. Failure to comply can lead to IRS penalties.

Financial Advice: If you are concerned about maximizing your retirement savings or managing an inheritance, consulting a financial adviser is advisable.

Impact of Inheritance Under the SECURE Act

If you have recently inherited a 401(k) plan from a deceased loved one, it's important to be aware of the implications of the SECURE Act:

Prior to the SECURE Act: Non-spousal beneficiaries could only take the Required Minimum Distribution over their life expectancy.

Changes Introduced by the SECURE Act: This tax advantage has been eliminated. Non-spousal beneficiaries are now required to liquidate the inherited 401(k) account within 10 years of the original plan holder’s death, which could significantly increase your taxable income.

*Note: If your plan is with Ubiquity, automatic distributions are currently unavailable.

What is the deadline to claim SECURE Act tax credits?

The SECURE Act extended the deadline for new plan adoption and updates from the last day of the tax year to the due date of the year’s tax return, including extensions. Contact Ubiquity to learn more about low-cost small business retirement plans.  

Contact Ubiquity to learn more about low-cost small business retirement plans.