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Federal Tax Credit Available For A Small Business That Adds — Or Maybe Added — 401k Plan Auto-Enrollment

By September 14, 2020No Comments

Automatic enrollment is a 401k plan feature whereby employees who do not voluntarily elect to contribute, or do not opt-out, will automatically have contributions deducted from pay at a predetermined rate. To encourage auto-enrollment, the Federal tax law changes adopted in December 2019 (the SECURE Act) added a tax credit, beginning with the 2020 tax year, in the amount of $500 per year (for three years) for small employers (i.e., generally up to 100 employees) that adopt an automatic enrollment feature. Recent IRS guidance clarified the “look-back” feature which provides that a business that added auto-enrollment for 2018 may be eligible for the credit for the 2020 tax year, and a business that added auto-enrollment for 2019 may be eligible for the credit for the 2020 and 2021 tax years. ACSI (www.acsi-ny.com or mbrand@acsi-ny.com) is available to help you learn more about auto-enrollment.