SECURE Act Tax Credit

We’ve been getting a lot of questions regarding the new SECURE Act tax credit available for the 2020 plan year and following. Below is a great summary we put together from our reading of the law:

Old rule: Lesser of half or $500 tax credit for first 3 years of operation of plan(s) if have at least one Non-Highly Compensated Employee (NHCE); for example, must have had at least $1,000 plan expenses outside of the plan to take advantage.

New rule: ยง104 of the SECURE Act increases by up to 11-fold the small employer pension plan startup credit. The following table breaks down the credit based on the number of employees who are not a highly compensated employee (HCE) but still lesser of half of expenses paid (except the EACA credit; eligible for older plans as well):

Number of Plan Participants who are not HCE Potential Credit
1 or 2 $500
3 to 20 $250 X Number of NHCEs
20 or more $5,000
Auto Enroll (EACA) Additional $500

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