In the current economic landscape of the United States, workers are facing a dual challenge: grappling with soaring living costs and struggling to save for retirement. High inflation, combined with dwindling savings and a competitive job market are a few of the key sources causing issues with the ability to save for retirement.
Fortunately, the SECURE Act 2.0, which was signed into law at the end of 2022, may help a potential solution to incentivize businesses to assist their employees save for retirement. In addition to exploring the nuances of the SECURE Act 2.0 and its benefits for businesses and employees, the article will take a look at a key service provider who can assist with the facilitation and implementation of these initiatives.
The Struggle with Rising Costs
The recent years have seen a significant rise in the cost of living across the United States. Inflation has led to rising food costs, housing costs, healthcare expenses, and other necessities, leaving many American workers in a precarious financial situation. This uptick in expenses has a direct and profound impact on their ability to save for retirement. In fact, a 2023 poll conducted by Gallup found that only 43% of non-retired adults expect to be financially well-off in retirement.
For a considerable number of Americans, the immediate financial pressures — such as paying for housing, utilities, healthcare, and education — take precedence over long-term savings. As a result, retirement planning often takes a back seat. This scenario is especially true for low to middle-income earners who find it increasingly challenging to allocate funds towards retirement savings accounts like 401(k)s or IRAs.
Rising costs are also putting considerable pressure on businesses as well. With inflation placing upward pressure on necessary hard costs and essentials needed to operate, naturally other areas within the business will need to face cuts to make up for the short-fall. To make matters worse, the ever-tightening labor pool is making it difficult for SMBs to compete with larger organizations for top-tier workers.
SECURE Act 2.0: A Beacon of Hope?
Recognizing these challenges, the U.S. government has taken steps to ease the burden on workers and encourage retirement savings. A pivotal move in this direction is the introduction of the SECURE (Setting Every Community Up for Retirement Enhancement) Act 2.0. This legislation builds on the foundations of the original SECURE Act, aiming to provide more Americans with the opportunity to save for retirement.
What is the SECURE Act 2.0?
The SECURE Act 2.0 is a comprehensive piece of legislation designed to expand access to retirement plans, increase retirement savings, and simplify existing retirement rules. It targets both employers and employees, offering incentives and flexibility to boost retirement savings.
Employer Benefits
- Tax Incentives: The Act offers enhanced tax credits to small businesses that set up retirement plans, making it more financially feasible for these businesses to offer such benefits to their employees.
- Simplified Administration: It simplifies the administrative requirements for offering a retirement plan, reducing the burden and complexity for employers, especially small businesses.
- Multi-Employer Plans: The Act encourages small businesses to band together to offer multi-employer plans, reducing costs and administrative duties.
- Competitive Advantage For Recruiting and Retaining Employees: Given the parameters of the SECURE Act 2.0, SMBs will be able to greatly increase their competitiveness for top-tier workers by offering 401k and other retirement benefits that little-to-no cost.
Employee Benefits
- Automatic Enrollment: One of the Act’s central features is to promote automatic enrollment in employer retirement plans, which has been shown to increase participation rates.
- Higher Catch-up Contributions: The Act allows for higher catch-up contributions for older workers, enabling them to save more as they near retirement. Workers who are at least 50 years old can contribute an additional $7,500 in catch-up contributions. In 2025, employees aged 60 to 63 can contribute an increased catch-up amount up to $10,000.
- Student Loan Matching: Employers can contribute to retirement accounts in parallel to employee student loan payments, aiding younger workers who are burdened by student debt.
- Part-time Worker Participation: It expands eligibility for long-term, part-time workers, allowing more people to contribute to employer-sponsored retirement plans. The SECURE Act 2.0 will allow part-time employees who have been with the employer for two years to be eligible for retirement benefits starting in 2025.
Compared to the original version of the SECURE Act, employers with up to 50 employees will be eligible for tax credits equivalent to 100% of qualified start-up costs for new retirement plans. For example, if a company has exactly 50 employees, the U.S. government will pay the entire cost of setting up 401(k) plans for those employees, up to $5,000 via tax credits to the employer.
In addition, the updated version of the law provides other tax credit incentives to employers who offer profit-sharing contributions for the first five years of the new retirement plan. This particular credit is eligible for businesses with up to 100 employees. The match credit is then slowly phased out over five years (100% in years 1 & 2, 75% in year 3, 50% in year 4 and 25% in year 5).
Asure Software: Facilitating Retirement Solutions for Employers
In the context of the SECURE Act 2.0 and the broader challenge of setting up and managing retirement plans, companies like Asure Software (NASDAQ: ASUR) emerge as vital players. Asure Software specializes in offering comprehensive solutions that can significantly streamline the process for employers to set up and manage 401(k)s and other retirement options. This includes being able to obtain SECURE Act 2.0 tax credits, which will allow SMB clients to begin offering 401k benefits at no cost.
How Asure Software Contributes
- Obtain SECURE Act 2.0 Tax Credits: Asure’s services focus on assisting their SMB clients with securing the necessary tax credits under the law in order to begin offering retirement benefits at no cost.
- Simplified Plan Management: Asure’s software solutions provide an intuitive platform for employers to manage retirement plans. This simplification is crucial for small to medium-sized businesses that may not have dedicated HR departments.
- Automated Compliance: With constantly evolving regulations around retirement savings, Asure Software helps ensure that employers remain compliant with all legal requirements, thus avoiding potential penalties and legal issues.
- Integration with Payroll Systems: Asure’s platforms often integrate seamlessly with existing payroll systems. This integration ensures that contributions to retirement plans are accurately and automatically deducted from employees’ paychecks, reducing administrative errors.
- Customizable Retirement Plans: Asure Software offers flexibility in plan design, allowing employers to tailor retirement plans according to the specific needs of their workforce. This customization can be a significant factor in increasing employee participation.
- Employee Education and Engagement: They also provide tools for employee education on retirement savings, which is vital in encouraging employees to participate and increase their retirement contributions.
- Cost-Effective Solutions: For small businesses, in particular, cost is a major barrier to offering retirement benefits. Asure’s solutions are designed to be cost-effective, aligning with the incentives provided by the SECURE Act 2.0.
The Broader Impact
By utilizing services like those offered by Asure Software, employers can more easily navigate the complexities of offering retirement benefits. This ease of use is especially important given the SECURE Act 2.0’s provisions, which aim to increase the availability and attractiveness of employer-sponsored retirement plans.
Furthermore, as more employers can offer these plans, employees stand a better chance of participating in and benefiting from employer-sponsored retirement savings. These services also allow smaller-to-mid-sized businesses (SMBs) to be more competitive in the job market by being able to attract and retain employees.
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