Do You Know How SECURE 2.0 Will Affect Your Manufacturing Company?

The SECURE 2.0 Act, enacted at the end of 2022, expands on the retirement plan improvements made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act). In general, SECURE 2.0 gives employees the opportunity to save more and save longer for retirement, at a lower tax cost.

manufacturing employee holding a tablet while working in a machine shop

In some cases, the new law imposes additional requirements on manufacturers (and other employers) that may add to the cost of providing a 401(k) plan or other defined contribution plan. Other provisions are optional. But both the required and optional provisions can help you use your company's retirement plan to retain and attract quality employees in light of the current tight labor market. And if you're a smaller manufacturer without a 401(k) plan in place yet, you may be eligible for a tax break that has become even more valuable.

New Requirements

Here are two significant requirements that will go into effect after 2024:

Optional Enhancements

Here are some optional ways SECURE 2.0 allows you to enhance your company's 401(k) plan:

A Valuable Credit

Under the first SECURE Act, a manufacturer with 100 or fewer employees could claim a credit for three years equal to 50% of the administrative costs of starting a 401(k) plan, up to a maximum of $5,000. Beginning in 2023, companies with 50 or fewer employees can now qualify for a credit equal to 100% of the costs, up to $5,000.

The 100% credit is phased out for a business with 51 to 100 employees. An additional credit of up to $1,000 per employee is available for employer contributions for employees earning less than $100,000.

Other Enhancements

Here are two more provisions manufacturers should be aware of:

Learn More

Bear in mind that this is only an overview of key changes that may apply to your manufacturing company's 401(k) plan. Other provisions may affect your company. If you have questions regarding the new law, please contact us.

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