Economic Update

The Secure Act 2.0

Top Takeaways for Employers

Part 3 of 3

In this issue, we conclude our discussion of the SECURE 2.0 Act (Setting Every Community Up for Retirement Enhancement) by focusing on some of the ways it affects employers. The changes that we summarize in this issue reflect the intent of the bi-partisan authors of the Act to increase the number of Americans participating in retirement plans by decreasing the cost and complexity of these plans for employers.

Small Employer Start-Up Credit Increase

To address the cost to small businesses (up to 50 employees) of setting up pension plans, the Act 1) increases the three-year start-up credit from 50% of administrative costs to 100%, and 2) offers additional credit (except in the case of defined benefit plans) for a percentage of employer contributions up to $1000 per employee for up to five years. Percentages start at 100% for years one and two, fall to 75% in year three, 50% in year four and 25% in year five. These changes are effective for taxable years beginning after December 31, 2022. (Section 102)

Small Employer credit for military spouses

The Act addresses the low rate of participation in retirement plans by military spouses (due to typically short periods of employment) by giving small employers tax credits if they: 1) make military spouses eligible to participate in plans within two months of hire, 2) make these spouses eligible immediately (upon plan eligibility) for any matching or nonelective contributions that they would otherwise be eligible for at two years, and 3) vest these spouses immediately in 100% of employer contributions.  (Section 112)

Starter 401(k) Plans

Employers who have not sponsored retirement plans may offer a deferral-only, safe harbor 401(k) plan in which all employees not covered by a collective bargaining agreement and subject to an employer’s age and service requirements are automatically enrolled at a deferral rate of three to fifteen percent in plan years beginning after December 31, 2023. Employees may opt out, and employer contributions and complex testing are not required. Beginning in 2024, the annual contribution limit is $6,000, indexed for inflation and employees over age 60 can make catch-up contributions of $1,000 (also indexed). (Section 121)

The 358-page Secure 2.0 Act has 92 provisions, so we’ve summarized the basics of only a few in this newsletter. For information about how the Act could affect you, as an individual or employer, please give us a call.

Lifestyle

There’s no place like (these) homes.

If there isn’t a vacation to an exotic location on your summer calendar or you simply enjoy seeing some amazing homes, cabins, igloos, boats, treehouses and B&Bs, check out The World’s Most Amazing Vacation Rentals on Netflix. Now in its second season, the three hosts travel across the globe to visit modern, rustic, and always-unique locations that are perfect for weddings (think California vineyard or 200-year-old Mexican hacienda), or eco-friendly, give-back, and even paranormal experiences.

If you are a Netflix subscriber who watched The Empress more for the setting than historical accuracy, you are familiar with Sisi’s primary residence (Schloss Weissenstein). Its owners opened it via lottery in November of 2022 for only two nights (June 19 and 20, 2023) and to only four guests.

Spoiler alert: We didn’t win but if you did, we’ll happily skip the next episode of The World’s Most Amazing Vacation Rentals to hear about your once-in-a-lifetime experience.

How We Help

Let us be your sounding board.

It’s not unusual for clients to use us as a sounding board when they are concerned about their parents’ financial decisions. Sometimes they want to know what we think of an investment recommendation that one of their parents’ advisors has made. Sometimes the concern relates to home repairs or unusual activity in a checking or savings account. These concerns are worth acting on because, according to data from the Federal Trade Commission, consumers reported losses of $8.8 billion in 2022, and investment scams topped the list at over $3.8 billion.

As this chart illustrates, consumers age 80 and older suffer a greater median monetary loss than any other age group, followed by those in the 70 to 79 age group.

If you’ve ever wondered whether someone is taking advantage of a senior in your life, we are here to help you determine the answer. 

Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member ​FINRA/SIPC.​ Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors.