Benefits Of The Secure Act

The recently enacted SECURE Act accomplishes several laudable purposes.  One of the features of this Act is to expand the availability of tax-advantaged retirement accounts to small businesses and their employees.  This new law offers at least four distinct changes designed with this goal in mind:

  1. It is now easier for small businesses to enroll workers in “safe harbor” retirement 401(k) plans.  The cap for such plans is increased from 10% of wages to 15%.
  2. Providing 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, who need only work 1,000 hours in a single year to qualify. Employees who work three consecutive years with 500 hours of service also make the cut.
  4. The SECURE Act also encourages businesses to include more annuities in their 401(k) plans by removing the employer’s legal liability for any failures of the annuity plans. These employers are also no longer required to choose the lowest cost plan, thus enabling them to elect quality over lower cost.

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 due to their failure to 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.