Retirement Packages and the SECURE Act: Getting to the Bottom Line of Retirement Benefits

Posted on: July 28, 2020

By: Ben Blevins, District Manager – ADP Retirement Services

Over the last six years I have met with hundreds of small business owners and had conversations surrounding their benefit package, business strategy, successes and failures, and overall direction they were heading within each of their own industries. I sincerely enjoyed these conversations as it helped me learn the challenges small businesses face and provide solutions that can help their business grow or keep them sustainable in the long term.

One of the most prevalent topics that owners and I discuss is finding and keeping quality employees who work hard and have a vested interest in the success of their company. Many have stated if they could find the right people, they could grow their business substantially, or if one of their key people left, it would have a significant impact on operations and their bottom line. In response to this problem, many business owners generally want to look at providing a benefit package that can help retain and recruit the quality people they desire.  However, this sometimes can come at a cost that they or the employees cannot afford. To give a general example: Many owners would love to offer health coverage but typically for a company policy to be eligible, 50% of the employees must participate and the business must pay at least 50% of the lowest premium per month, which is never below $400-$500 just for an individual’s coverage. You do the math on a 10-person company where everyone wants coverage – that’s $5k a month where the owner pays half and the employees pay half (and that is for a policy with a high deductible!)

With health coverage out of reach for most small businesses, many owners have leaned instead toward some type of retirement plan benefit that can help offset their own tax liability and provide the second most wanted benefit from employees. One scary statistic that we have researched is that 92% of people will not save a dime outside of whatever retirement plan their company has established.  The government knows that this is a statistic that will have far reaching consequences down the road for many, especially with Social Security depleting funds faster than they can collect. The only way to solve that problem is to either cut Social Security benefits or raise FICA tax, which will negatively impact you as the business owner personally or professionally if the government goes with the latter choice. For this reason, legislation was passed in January 2020 called the SECURE Act, which significantly increased the tax credits small companies receive for putting a new retirement plan in place.

With the SECURE Act, considering your various options for retirement packages can make your business eligible for up to $16,500 in tax credits over the next three years, just for having a plan in place for your employees. Whether it be a 401(k), SEP IRA, or Simple IRA, implementing a retirement package can earn you money while helping your employees save for the future – a system that works for everyone. With the SECURE Act, the role the price tag attributed to retirement plans plays is minimized. Even the smallest of businesses can reap the long-term rewards of enacting retirement benefits, saving the business owner money in taxes, building goodwill with your current employees, and making your business more attractive to future talent.

Most owners that I meet who are successful have a strong team built around them, a quality product or service they offer at a fair value, and an effective process in managing their business operations. Owners make decisions every day that impact their business, and taking the time to learn how retirement plans can help your business and even your own financial independence down the road is another crucial step to take. Finding the right plan is the hard part, but the benefits you will yield in doing so will be well worth the effort!

Ben Blevins is the District Manager of ADP Retirement Services. As one of our valued referral partners, Ben worked in collaboration with MD Andersen, CPA, PA this month to bring you the most up-to-date information regarding Employee Benefits and the SECURE Act. To learn more about retirement packages and the array of options ADP can provide to you, reach out today to schedule a consultation with Ben and discuss your particular business needs.

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