The SECURE Act (Setting Every Community Up for Retirement Enhancement Act) became law as part of the year-end federal budget package signed by President Trump in December, and looks to be the most important piece of retirement legislation in a decade or more.

SECURE-Act-aids-small-businesses

The SECURE Act will help businesses adopt retirement plans.

The SECURE Act is particularly beneficial for small employers and their employees. Some of its provisions include:

Loosens plan eligibility for long-term, part-time employees. Under previous law, employers could require employees to work 1,000 hours in 12 months to be eligible to participate in the retirement plan. The new law opens up eligibility to those who work at least 500 hours in three consecutive 12-month periods. This change is effective for plan years beginning after Dec. 31, 2020.

Expands the availability of multiple employer plans (MEPs). Prior to the SECURE Act, small employers who wanted to pool retirement plans to share and save costs had to have a commonality of interest (same industry, for instance). Now, open MEPs are possibility, meaning there needn’t be any commonality of interest. This too is effective for plan years starting after Dec. 31, 2020.

Increases the income tax credit for small employers starting retirement plans. The credit for those small businesses adopting retirement plans now rises from $500 to $5,000.

Adds a new tax credit for small businesses that adopt auto-enrollment. Those small employers who adopt auto-enrollment into their retirement plans will receive a $500 tax credit for three years. Both tax credits are effective now.