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BENEFITS OF THE SECURE ACT

We had a few months to assess the regulatory response to the SECURE Act enacted in 2019. So far, it looks like the Acts’ intended benefits for small businesses and their employees remain intact. Chief among those benefits are the following:

1. Small businesses can now more easily enroll workers in “safe harbor” retirement 401(k) plans. The cap for such plans is increased from 10% to 15% of wages.
2. The Act provides a maximum tax credit of $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment.
3. Businesses can now expand the availability of retirement plans to part-time employees.  Employees who work 1,000 hours or more in a single year qualify. Employees who work three consecutive years with at least 500 hours of service also make the cut.
4. The SECURE Act also encourages businesses to include more annuities in their 401(k) plans.  The Act removes the employer’s legal liability for any failures of the annuity plans. Employers are also no longer required to choose the lowest cost plan. 

That final benefit can be a bit of a double edged sword. For example, most annuities do not allow the annuitant to pass the benefits on to his or her heirs, unless a rider which reduces the payout is purchased. Many investors would rather manage their funds payout directly, so they do not lose control over their accounts if they outlive the annuity term.

Despite such concerns, the SECURE Act is, on balance, beneficial for small businesses and their employees. It is thus important to know the benefits and burdens of this new expansive law. The lawyers at LAMBERT LAW can help you make these benefits a reality for your business or professional practice.

Caution: This article provides general information and is not intended to be legal advice. You should contact LAMBERT LAW, 407 6th St., Ste A, Rochester, MI 48307 (248) 642-7774 if you are seeking specific legal advice regarding the topics discussed above.

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