Navigating the Impact of SECURE Act 2.0 Legislation on Franchises: A Call to Secure Your Retirement Future

In the ever-changing world of retirement planning, SECURE Act 2.0 legislation has emerged as a transformative force, presenting significant implications for franchise owners and their employees. This effort aims to strengthen retirement security for Americans. In this article, we'll dive into the key aspects of SECURE Act 2.0 and explore how it impacts franchises.

SECURE Act 2.0 overview

The SECURE (Setting Every Community Up for Retirement Enhancement) Act was first signed into law on December 20, 2019. The original iteration of the bill made several adjustments to the country’s retirement system. However, it wasn’t a comprehensive solution to the retirement crisis in America.

SECURE Act 2.0 was signed into law in 2022, adding 90+ provisions which introduces significant changes for small businesses and those saving for retirement. 

Let’s dive into some of the key provisions. 

Increased tax credits for small employers

For small businesses with up to 50 employees, SECURE Act 2.0 increases the existing tax credit to 100% of plan start-up costs (up from 50%), capped annually at $5,000 per employer (which remains unchanged) for each of the first three years. That could mean a total of $15,000. Eligible businesses with 51 to 100 employees are still subject to original SECURE Act tax credits equal to 50% of administrative costs, capped annually at $5,000 per employer for three years. See what the cost of a 401(k) could be with tax credits here.

Automatic enrollment and escalation

SECURE Act 2.0 requires auto-enroll in new plans started after 12/29/22, beginning with the 2025 plan year. This means that any plan set up with an effective date after 12/29/2022 must add auto-enroll no later than 1/1/2025 (for calendar year plans). 

Automatic contributions must be at least 3% and may be up to 10% of employee compensation. Contribution rates must increase by 1% each year until at least 10% is reached, but not more than 15%. 

A tax credit of $500 per year for the first three years of electing auto-enrollment is still available.

Expanded access to part-time workers

In the original SECURE Act legislation, employers with a 401(k) plan were required to offer the plan to employees who completed three consecutive years of employment where they worked at least 500 hours. Through SECURE Act 2.0 provisions, effective with the 2025 plan year, this requirement is reduced to two consecutive years with 500 hours worked.

Learn more about 401(k) benefits for part-time employees and interns including the expanded eligibility rules.

What to do next

At Human Interest, we believe in providing franchises with access to retirement benefit plans. SECURE Act 2.0 helps advance this mission—but we believe there’s more work to be done.

Interested in learning more about starting an affordable retirement plan? Contact our franchise retirement specialists here.

Human Interest Inc. is an affordable, full-service 401(k) and 403(b) provider that seeks to make it easy for small and medium-sized businesses to assist their employees with investing for retirement. For more information, please visit humaninterest.com.

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Human Interest
Human Interest is a modern and affordable 401(k) and 403(b) solution for small and medium-sized businesses. Our mission is to ensure people in all lines of work have access to retirement benefits. Learn More