Estimate your Tax Credit for Starting a 401(k) Plan
SECURE 2.0 significantly enhanced the tax credits available to eligible small businesses that start a new plan, add an auto-enroll feature, or contributions made by employers. Use our free calculator to estimate your credits.
How many employees do you have?
How many of the employees are HCEs?
Will you fund an employer contribution?
Will your plan offer automatic enrollment?
Frequently Asked Questions
Have questions about SECURE 2.0 401(k) Tax Credits? Check out our FAQ.
Created in SECURE and enhanced in SECURE 2.0, an eligible employer may claim up to 100% of its qualified startup costs for adopting and maintaining a new 401(k) plan.
An eligible business may receive a tax credit for employer contributions provided by small businesses over the first few years of the 401(k) plan. The maximum limit is $1,000 per eligible employee per year. An eligible employee is paid no more than $100,000 a year (adjusted for inflation). The exact tax credit depends upon the number of employees and the number of years since the plan's startup.
Small businesses are eligible for a $500 tax credit by adding an automatic enrollment feature to a new or existing 401(k) plan. To be eligible, the auto-enrollment feature must meet Eligible Automatic Contribution Arrangement (EACA) requirements.
To be eligible, the business must meet 3 requirements:
- Have 100 or fewer employees who were paid at least $5,000 in compensation by you in the preceding year;
- Cover at least one non-HCE with your retirement plan; and
- In the 3 tax years before the first year you’re eligible for the credit, your employees weren’t substantially the same employees who received contributions or accrued benefits in another retirement plan sponsored by you, a member of a controlled group that includes you, or a predecessor of either.
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