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Retirement

State Mandated Retirement Plans for Small and Medium-sized Businesses

By December 16, 2022No Comments

SECURE Act 2.0 Legislation Overview

  • The retirement industry experts widely expect it to pass by the end of the year (2022).
  • Take away the option for auto-enrollment (for 401k and 403b retirement plans).
  • Increases the tax credits for starting a company retirement plan from between 75-100%
    • Currently 50%
  • New credits for employer contributions
    • Historically been tax deductible. Moving forward will get a dollar-for-dollar tax credit.
  • Increases mandatory RMD age from 72 to 75.

Stats for Americans in retirement: These are the primary reasons for current legislation

  • 25% of U.S. adults have no retirement savings.
  • The median for individuals nearing retirement (ages 55-64) is less than $1,000/month in available income.
  • 40% of working Americans are confident their retirement planning is on track (overconfident?).

Legislation mandates have been introduced in most states and are currently active in 16 states.

Of those active:

  • Employee eligibility starts at age 18
  • All post-tax, Roth IRAs
  • Free administrative cost

Program details:

  • Contribution Limits
    • 401(k): $22,500 ($30,000 if older than 50)
    • IRA: $6,000 ($7,000 if older than 50)
  • Deadlines/Compliance
    • Many state-run programs require employer compliance by a given deadline.
    • Deadlines may be staggered or based on number of qualified employees.
  • Fees/Penalties
    • Employers may receive fines for failure to provide a retirement savings option to eligible employees.
  • Administrative Duties
    • Employers are often required to bear the burden of paperwork and processing to ensure program compliance.