The passage of Secure 2.0 means there’s never been a better time to open a 401(k) plan for your small business. Combining the new law’s benefits with our affordable, flat fees¹ is a double win for small businesses like yours and your employees. We’ve created this quick guide of Secure 2.0 highlights to help you maximize your Secure 2.0 benefits.
Secure 2.0 delivers additional retirement plan benefits for small business owners. Read on for more detailed information.
How it Benefits You
How Ubiquity Helps You
As stated briefly above, Secure 2.0 offers government tax credits for small businesses with up to 50 employees to offset their setup and plan administration costs for the first three years. This covers 100% of expenses (previously 50%) for 3 years from inception, and a maximum of $5k/year for <50 employees.
These credits are up to $5,000 per year or $15,000 over 3 years. There’s no reason a small business can’t open a 401(k) plan now, especially since the government is providing so much assistance! Effective after December 31, 2022.
How it Benefits You
How Ubiquity Helps You
Secure 2.0 requires most employers beginning in 2025 to automatically enroll all eligible employees in a 401(k) plan at a contribution rate of at least 3%, no more than 10%, and up to 10%, nor more than 15%, of their gross pay. To support this requirement, the government offers compliant employers an additional $500/year credit for the first three years of the plan. Over three years, this is worth $1,500!
Businesses with ten or fewer employees and startups with less than three years in business are exempt but starting in 2025, Plans established by December 29, 2022 will be required to add automatic enrollment no later than January 1, 2025.
How it Benefits You
How Ubiquity Helps You
A credit is now granted to eligible small businesses for any employer matching contributions to an employee’s 401(k), up to $1,000 of credit per employee per year. This applies to businesses with 50 or fewer employees and is phased out for employers with 51-100 employees. Effective after December 31, 2022.
How it Benefits You
How Ubiquity Helps You
Starting this year, Americans aged 60 to 63 can contribute catch-up contributions of the greater of $10,000 or 50% of the catch-up contribution limit indexed in 2025 as Roth contributions, meaning they pay income tax on that money now to enjoy tax-free capital gains at withdrawal time.
Also, required minimum distributions (RMDs) are now further delayed. The increase from 72 to 73 in 2023 and 75 in 2033. Included in these changes is a reduction in the penalty for missed late RMDs from 50% to 25%. Effective after December 31, 2022.
How it Benefits You
How Ubiquity Helps You
Now with Secure 2.0, businesses can enroll part-time employees with:
Under Secure 2.0, the service years decreased from three to two effective after December 31, 2024. The first group of long-term, part-time workers will become eligible for participation as of January 1, 2024, for employee contributions only.
Secure 2.0 also includes several other changes that enable savers to put away more money for a longer period. This helps when it comes to compound interest. When you invest in a 401(k), the money you add generates interest. This interest compounds year after year, as you earn interest on your interest.
Let’s assume a very modest ability to save and a so-so economy returning just 5%. If you put in $5,000 this month and contribute just $100/month to your 401(k), in 30 years’ time you could have $105,924 saved for retirement.
On the other hand, say you put in the maximum of $66,000 today and contribute at least that much every year for 30 years. You’d be sitting on $4.2 million or more for retirement.
Effective in 2027:
How it Benefits You
How Ubiquity Helps You
Replacing the Saver’s Tax Credit, the Consolidated Appropriations Act of 2023 (which houses Secure 2.0) will enable lower-income employees to be eligible to receive a federal matching contribution of up to $2,000 per year that would be deposited into their retirement savings account. The matching contribution is 50% of the employee’s contributions but is phased out as income increases (for example, between $41,000 and $71,000 for married, filing jointly; $20,500 to $35,500 for single taxpayers, etc.).
Contact Ubiquity, the #1-ranked² 401(k) provider for small and medium-sized businesses on Google Reviews³.
Our low-fee, customizable 401(k) retirement plans for small businesses can help you take full advantage of Secure 2.0 provisions and help you grow your business.
¹Flat fees are charged by Decimal, Inc. for recordkeeping and administrative services. Third-party service providers may assess asset-based fees to customers. Plan Sponsors are advised to review all service agreements with providers (e.g., investment advisors, custodians, broker-dealers) to evaluate total plan costs.
²An evaluation has been conducted by Decimal, Inc. through its research of independent customer reviews on Google, Trustpilot, and the Better Business Bureau as reported by unaffiliated contributors on or before September 30, 2022, with a revaluation date on January 12, 2023, resulting in a better evaluation, for four similar small-business 401(k) providers in the marketplace.
³Google ratings are based on client reviews of Ubiquity Retirement + Savings products and services. Details on the methodology Google employs to calculate ratings can be found here. Rates currently displayed are as of January 12, 2023 and are based on reviews from 2014 through 2023.
Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.
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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357
© 2023 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357