5 maneras en que los asesores financieros pueden aprovechar las reglas de la Ley SECURE para ayudar a los clientes a obtener créditos fiscales con el plan de jubilación

The SECURE Act, which was signed into law Dec. 20, 2019, makes sweeping changes to several aspects of the retirement plan industry. How can financial advisors leverage the new rules in the SECURE Act? Let’s look at the items that have created the most “buzz” in the advisor world.

Multiple Employer Plans/Pooled Employer Plans/Pooled Plan Providers

The new rules allow two or more unrelated employers to join a pooled employer plan (PEP). The PEP would have a pooled plan provider (PPP).  The PEP differs from a multiple employer plan (MEP), which requires the participating employers to have a common interest or function. This provision goes into effect Jan. 1, 2021.

When laws are written, all the specific details may not be provided within the law itself. In the case of MEP/PEP/PPP, this couldn’t be more true. There are several federal agency directives related to these items, including the definition of a PEP, and what compliance requirements follow. The Secretary of Labor also will need to provide guidance on pooled plan providers and where the lines of responsibility are to maintain a compliant PEP.

Many providers are proceeding with caution in deciding whether to become a pooled plan provider and sponsor a PEP. There is significant administrative burden and fiduciary liability associated with the obligations assigned to a PPP. Agency guidance, when announced, should help providers make these decisions.

Small employer retirement plan startup tax credit

Employers with 100 or fewer employees who received at least $5,000 in compensation for the preceding year are eligible to take advantage of an increased tax credit when they start a retirement plan.  Previously, the available credit was $500 for a period of three years, but the maximum credit allowed is now $5,000 per year for three years. 

The credit is 50 percent of the employer’s ordinary and necessary eligible retirement plan startup costs, up to the annual cap, which is determined by the size of the employer. The new minimum credit is $500, and the maximum is the lesser of $5,000, or $250 times the number of non-highly compensated employees eligible to participate in the plan.

Ordinary and necessary eligible costs would include set-up costs, administration costs, and costs associated with educating employees about the plan. Keep in mind though, if these expenses are used as tax deductions, they aren’t eligible for the tax credit. Qualifying employers may claim the credit on IRS Form 8881 for tax years 2020 and later.

New $500 Tax Credit for Small Employer Auto-Enrollment

A new tax credit is available to small employers (100 or fewer employees who received at least $5,000 in compensation for the preceding year) when eligible automatic enrollment features are included in the plan startup, or existing plans are amended to add the feature. This new credit of $500 annually for three years is in addition to the startup credit, where applicable, and available for plan years 2020 and later.

Automatic enrollment is always encouraged, as it is a proven method to increase participation. Plans may adopt a qualified automatic contribution arrangement (QACA) at the beginning of a plan year, or when a plan is newly adopted mid-year. This arrangement does require an employer Safe Harbor contribution, but automatically satisfies discrimination testing requirements. Plans that wish to take advantage of adding an automatic enrollment feature to an existing plan mid-year cannot add QACA at that time, and would need to wait until Jan. 1, 2021 to include the plan provision.

Currently, an eligible automatic enrollment arrangement (EACA) is an allowable add to a plan mid-year, however this feature does not provide the non-discrimination testing relief, as no employer contribution is required. 

Additional Time to Adopt a Plan

Business owners who want to reduce their taxes will be able to establish a profit-sharing plan after the end of the year, beginning for plan years 2020 and later. Now, rather than requiring a plan to be established by the last day of the calendar year, employers have until their tax filing deadline, including extensions, to start a plan and benefit from the tax break afforded by an employer contribution. 

These plans would have an effective date of the last day of the tax year (Dec. 31), and the profit-sharing allocation would be based on the full annual wages of eligible employees. Employee deferrals could be allowed after the plan adoption date.

Additional Time to Elect Safe Harbor

The safe harbor plan design allows employers to enjoy the benefit of an “automatic pass” on non-discrimination testing. Previously, if you wanted to change your plan to a safe harbor arrangement, or adopt a new plan with safe harbor, it had to be done more than 90 days prior to the end of the plan year.

The SECURE Act is making it easier to become safe harbor through the following provisions.

• Non-safe harbor plans may amend to become safe harbor at any time up to 30 days prior to the end of the plan year. Note: This is applicable to safe harbor plans that include a non-elective contribution of 3% of compensation, not a safe harbor matching contribution design.
• A plan can amend to be safe harbor after this date, and at any time until the close of the following plan year (Dec. 31 for calendar plan years). To utilize this grace period, the non-elective safe harbor contribution for employees must be 4% of compensation, rather than the normal 3%.
• Safe harbor notices are no longer required for plans that use the non-elective safe harbor contribution plan design.

¿Qué sigue?

With any new law or regulation, there are always additional compliance obligations or extra administrative work. Paychex understands and wants to help employers take advantage of these opportunities that could help grow their business, and help employees save for retirement.

Paychex is the nation’s largest recordkeeper for retirement plans, with more than 84,000, according to PLANSPONSOR magazine. We understand the complexities that challenge business owners and can offer retirement solutions and services to help make administering a plan simpler.

The provisions of the SECURE Act are many, and Paychex will continue to provide updates as we receive additional published guidance from the DOL, IRS, or other affected agencies that will offer clarity on specific operation of these rules.