Late last year, Congress passed and the President signed the SECURE Act, which makes a number of changes which could impact both individual and business taxpayers. Here are the highlights.
How does the SECURE Act affect my business?
- The SECURE Act now permits employers to add a safe harbor feature to their existing 401(k) plans once the year has started if they contribute at least 4% of employees’ pay instead of the regular 3%. This is designed to assist employers to correct failed top-heavy testing by moving to a safe harbor plan and making a 4% non-elective contribution to participants.
- The Act now requires employers to include long-term part-time workers as participants in defined-contribution plans except in the case of collectively bargained plans. Employees are deemed eligible if they have 500 hours of service each year for three consecutive years and are age 21 or older.
- The SECURE Act also increases the portability of annuity investments by letting employees who take another job or retire move their annuity to another 401(k) plan or to an IRA without surrender charges and fees.
- The SECURE Act allows unrelated small employers to band together in “open” 401(k) multiple-employer plans (MEPs)—also referred to as pooled employer plans (PEPs)—designed to reduce the costs and administrative burdens for small businesses of maintaining such plans on their own.
These are some of the highlights of this bill which was part of the 1700 page Further Consolidated Appropriations Act that funded the government into 2020. It is important to note that each situation is different, and if you have any questions about your own situation, please contact a Briggs & Veselka shareholder for further clarification and an analysis of the implications of your personal or business tax liabilities.