Hamilton Capital Partners | Atlanta, GA — Hamilton Capital Partners

New Tax Credits For Startup 401(k) Plans

Updated provisions in the SECURE 2.0 Act of 2022 offer small employers affordable options to start a workplace retirement plan. And, a newly-established employer-sponsored retirement plan could bring you some pretty significant savings. Here’s how.

Retirement Plan Start-up Credit

Eligible employers who adopt a new plan can claim a credit for up to 100% of start-up costs for the first 3-years. Eligible start-up costs for qualified plans include plan setup, administration, and employee education:

  • 100% of start-up costs for employers with 50 or fewer employees
  • 50% of start-up costs for employers with 51-100 employees
  • Minimum credit: $500 of eligible start-up costs
  • Maximum credit: Lesser of $5,000 or $250 times the number of non-highly compensated employees


Employer Contributions Tax Credit
Employers with 50 or fewer employers get a tax credit of up to $1000 per employee for employer contributions made on behalf of employees making $100,000 or less in FICA wages (the $100,000 income threshold will be indexed to inflation-adjusted beginning in 2024).

1-50 employees:
Year 1: 100%
Year 2: 100%
Year 3: 75%
Year 4: 50%
Year 5: 25%For employers with 51-100 employees, the credit is phased out by reducing the amount of the credit by 2% per year for per employee above 50.

Automatic Enrollment Tax Credit
An eligible employer that adds an eligible auto-enrollment feature to a new or existing plan can claim a credit of $500 per year for a 3- year for period.

Retirement Plan Start-up Credit Calculation

Content sourced and prepared by BPAS, www.bpas.com