�� benefits for $0? What SECURE 2.0 means for businesses.

Many Americans aren’t saving enough for retirement. But new legislation aims to help. Explore six highlights for small businesses that can help them help their employees foster financial security.

Business decision maker reviewing paperwork with an employee across a desk.

4 min read | July 25, 2023

Americans are due for a retirement confidence boost.

Consider:

Three in 10 workers don’t have access to a retirement plan through work.
Of those who do, nearly half don’t participate.

The widening gap between how much money people need to retire comfortably and how much they’ve saved was identified as a key disruptor in the 2022 Principal^® Future of �� survey.

�� legislation is here to help. Among its many perks and provisions, the SECURE 2.0 Act of 2022 helps knock down barriers to entry for retirement plan sponsors (businesses) and participants (employees), setting up both for better financial security.

According to the 2023 ��Financial Well-Being Index^SM:

of employees believe saving for retirement is important for their financial security.

of businesses say it’s their responsibility to help employees save for retirement.

Highlights of SECURE 2.0

The groundbreaking legislation boosts access, promotes participation, and aims to alleviate the all-too-common predicament of saving too little too late. Here are six key features for small businesses to know:

There’s a good chance your start-up costs are covered.
Tax credits can offset retirement plan start-up costs 100% for the first three years for businesses with 50 or fewer employees, up to a maximum possible credit of $5,000 each year. Businesses with up to 100 employees get a good chunk of the credit, too.

A new tax credit can help offset employer-match contributions.
Many employers choose to match the money employees are putting into their accounts as a valuable workplace benefit. Tax credits can now offset the expense up to $1,000 per employee in start-up plans for the first two years, with a reduced credit over the next three years.

of employees say employer match contributions help them save for retirement.

Matches can apply to student loan payments.
For many Americans, student loans overshadow retirement savings. Starting in 2024, businesses may choose to match qualified student loan payments, with the matching contributions deposited to the employee’s retirement savings.

of employees would be interested in setting up automatic student debt payments through their employer.

Long-term, part-time employees qualify.
Part-time workers have historically been excluded from employee benefits. The original SECURE Act passed in 2019 made anyone who worked at least 500 hours for three consecutive years, starting in 2021, eligible to participate. SECURE 2.0 reduces this requirement to only two consecutive years and includes 403(b) plans. Effective in 2025, anyone who’s worked at least 500 hours (about a quarter of a full-time position) for two consecutive years is eligible to participate.

Employees get automatically enrolled.
Starting in 2025, new plans will automatically enroll employees—jump-starting their participation and savings. Most employers will auto enroll everyone with a minimum rate of 3% and maximum of 10% of their wages.

of employees are comfortable with auto-enrollment.

Employee contributions automatically increase each year.
In tandem with automatic enrollment, employees’ contribution rates will automatically increase 1% each year, up to 10–15% of their wages.

of employees are comfortable with auto-escalation.

(PDF).

If this feels significant and game-changing, it’s because retirement security has bipartisan support. “This is coming to light as a fundamental need for American workers,” says Lance Schoening, director of policy at Principal.

“It goes to show how powerful these retirement tools and provisions are, and how proven they are in delivering positive results for workers—helping them save earlier in their careers and at progressively higher levels,” Schoening says.

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Well-Being Index℠ Insights

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Supporting my employees

U.S. Bureau of Labor Statistics: �� plans for workers in private industry and state and local government in 2022, February 2023.

��Financial Well-Being Index^SM, February 2023.

Employers with 51-100 employees can utilize the tax credit under the SECURE Act of 2019, which is 50% of qualifying start-up costs for new employee retirement plan (maximum $5,000 per year).

This applies only to employees earning $100,000 or less in FICA wages and will be indexed annually for inflation.

Qualified Student Loan Payments are roughly defined as payments to pay down a loan incurred to cover higher education expenses of the employee, the employee’s spouse, or a dependent at the time the loan was incurred. Elementary or high school tuition would not be qualified.

New plans established from Dec. 29, 2022, to Dec. 31, 2024, are required to automatically enroll their employees but may delay the process until 2025. This does not apply to companies with 10 or fewer employees who have been in business less than three years or have an existing plan, Simple Plan, church plans, or governmental plans.

The contribution cap for auto-escalation is 10% until 2025 when it will move up to 15%.

This article is intended to be educational in nature and is not intended to be taken as a recommendation.

Simply �� by Principal^® 401(k) plan record keeping, and administrative services are provided through Decimal, Inc. dba Ubiquity �� + Savings ("Ubiquity"). Ubiquity is not affiliated with any plan and investment administrative services provided through ��Life Insurance Company^® or affiliated with any company of the ��Financial Group^®.  ��makes available the Separate Accounts and collective investment trusts for customers to select them through Simply �� by Principal. All other services and mutual funds are provided by service providers not affiliated with any company of the ��Financial Group. Refer to related documents and agreements for more details on plan services available.

Mutual fund, separate account and collective investment trust trade instructions are processed by Matrix Settlement & Clearance Services, LLC through the NSCC Membership of its affiliate, Matrix Trust Company.

Simply �� by Principal^® requires a client service agreement between Ubiquity and the plan sponsor (Customer). In addition to and as part of the services, each Customer will sign separate agreements with the following parties: (i) custodian (ii) 3(38) investment manager, and (iii) ��Life Insurance Company, a Comprehensive �� Program (PCRP) offered through the Modular Group Annuity Contract for separate accounts, and a declaration of trust for ��collective investment funds. Simply �� by ��services, costs and resources are subject to change.

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