The Perfect Time to Start a 401(k) Plan
“The best time to plant a tree is 20 years ago. the second-best time is right now.”Chinese Proverb
If you’ve been thinking about starting a 401(k) plan, now is the perfect time! New changes through the SECURE Act are giving small businesses even more incentive to start. Employers with fewer than 100 employees who start a new 401(k) plan will now receive a tax credit to offset plan expenses for the first three years of the plan.
For a plan with ten Non-Highly Compensated Employees (NHCE) and two Highly Compensated Employees (HCE) here’s an example what that could look like:
Right now, the IRS is willing to pay half of your plan fees for three years! Even better – the costs you’ll still pay are written off as an expense, so the net Employer cost is actually even lower:
Start a 401k plan now and let the IRS pay almost 70% of your fees for three years. Add in the tax deductions you get just for making contributions to the plan, and it comes out to some serious savings. In 2020, $57,000 can be contributed to a 401(k) plan between Employer and Employee Contributions:
The IRS is offering you nearly $100,000 in tax savings over the next three years. Today is the perfect time for your business to start a 401(k) plan, save on taxes, and ramp up your retirement savings.
To learn how you can start, contact any Odyssey representative to lower your tax burden while increasing your retirement security.