SECURE Act – Tax Credit

John Markley - TRA Director of Industry Relations
John Markley, ASA, FCA, MAAA, FSPA, CPC
Director of Industry Relations

Thanks to the Secure Act, a new era begins for employers considering the implementation of 401(k) plans. Effective January 1, 2020, in order to encourage employers to establish 401(k) Plans, substantial tax credits will be available for employers with 100 or fewer employees.

To start a 401(k) Plan, for a Plan with 20 or more Non Highly Compensated Employees, a tax credit of $5,000 per year would be available for 3 years! The tax credit is available to cover 50% of the implementation and administrative costs of implementing a Plan!

Here is what the rule says:

  • For the first credit year (year when the Plan is established) and each of the 2 taxable years immediately following the first credit year, the tax credit available is the greater of –
    • $500, OR
    • The lesser of:
      • $250 for each NHCE who is eligible to participate in the Plan, and
      • $5,000

Effective for tax years beginning after 12/31/2019!

But wait, there’s more! The Secure Act also encourages Automatic Enrollment. For a Plan that implements Automatic Enrollment in 2020 or later, a $500 credit is available in the year that the Automatic Enrollment is implemented and each of the next 2 years. Yes, a new Plan that implements Automatic Enrollment would be eligible for both credits!

Go forth and establish new 401(k) Plans!

Contact your TRA Regional Sales Consultant for expert guidance in how to make the most of the new rules.


Consider TRA's 3(16) Plan Administration Relief Services (PARS)

To alleviate the day-to-day administrative burdens of yours or your clients retirement plans.