SECURE Act 2.0 is federal legislation that reshaped 401(k) rules for small businesses. It added new 401(k) plan startup tax credits, automatic enrollment requirements, and updated catch-up contribution rules. Some provisions already apply; others are still phasing in. For your business, that means new tax credits to claim now and new rules ahead.
Key Takeaways
- Up to $16,500 in tax credits is available over three years for eligible small businesses starting their first 401(k) plan under SECURE Act 2.0.
- December 31, 2026 is the deadline for most 401(k) plans to submit their SECURE 2.0 plan amendment.
- A new Saver's Match arrives in 2027, replacing the Saver's Credit with a direct matching contribution for eligible employees.
- High earners must start making catch-up contributions as Roth, not pre-tax.
- 401(k) plans generally require automatic enrollment, unless your business qualifies for an exemption.
What Is SECURE Act 2.0 for Small Businesses?
SECURE Act 2.0 is a 2022 federal law that expanded 401(k) rules for small businesses. It added new tax credits, an automatic enrollment requirement, and updated contribution rules, among other changes.
As a business owner, you need to watch these five areas:
- Which tax credits you can claim
- Whether automatic enrollment applies to your plan
- How catch-up contributions work for your team
- Which changes are still ahead
- Which plan features, rules, and deadlines apply to you
How Much Can My Business Get in SECURE Act 2.0 Tax Credits?
Small businesses starting their first 401(k) plan can claim thousands of dollars in tax credits under SECURE Act 2.0. The credits cover startup costs, employer contributions, and automatic enrollment.
However, startup credits only apply if your business has employees. Businesses that only have owners or only use contractors do not qualify for the credit.
Plan Startup Cost Tax Credit
Businesses with 100 or fewer employees can claim a retirement plans startup costs tax credit. The exact amount differs based on the number of employees in your business and their incomes.
- Businesses with 1-50 employees: 100% of plan startup costs, up to $5,000 per year for 3 years
- Businesses with 51-100 employees: 50% of plan startup costs, up to $5,000 per year for 3 years
However, the IRS has rules to make sure that your plan includes non-highly compensated employees (NHCEs). An NHCE is a worker who makes less than $160,000 in 2026 and does not own more than 5% of the business. This number is adjusted every year.
The amount of your business's individual credit depends on the amount of NHCEs who could join your plan. At least one NHCE must join your plan to qualify for this credit, but no other NHCEs are required to join. If at least one NHCE joins your plan, you will get a minimum $500 credit for your first year of startup costs. The overall amount increases by $250 the more NHCEs you employ, up to the first 20. Here is an example of the credit amount at different numbers of non-highly compensated employees:
| Eligible NHCEs who could join | Yearly cap |
|---|---|
| 1 (must join the plan to get the credit) | $500 (minimum) |
| 5 | $1,250 |
| 10 | $2,500 |
| 15 | $3,750 |
| 20+ | $5,000 (maximum) |
Keep in mind that the startup credit can only be used for the costs to set up and administer your plan and/or the cost to teach your employees about the plan. Your credit will not be more than these qualified startup costs. Consult with a tax professional to see how much your business could get.
SECURE Act 2.0 Startup Cost Credit Summary
| Item | 1-50 Employees | 51-100 Employees |
|---|---|---|
| Credit | 100% of eligible startup costs | 50% of eligible startup costs |
| Non-Highly Compensated Employees (NHCEs) | At least 1 must be in the plan | At least 1 must be in the plan |
| Yearly Limit | $250 per NHCE who can join, with a $500 minimum and $5,000 maximum | $250 per NHCE who can join, with a $500 minimum and $5,000 maximum |
| Length | 3 years | 3 years |
Automatic Enrollment Credit
Adding automatic enrollment to a new plan qualifies eligible businesses for an added $500 credit each year for three years. This credit is on top of the startup cost credit.
- Year 1: $500
- Year 2: $500
- Year 3: $500
Employer Contribution Credit
Businesses with 1-50 employees can claim a credit of up to $1,000 per employee based on the employer match, or contributions provided to the employees. Note this is only for matches made to employees making under $110,000 a year in 2026 (adjusted yearly for inflation). The credit is applied up to 100% for the first two years of the plan, and then steps down in the following three years. The amount of the credit per employee is:
- Year 1: 100% of employer contribution, up to $1,000 (year plan begins)
- Year 2: 100% of employer contribution, up to $1,000
- Year 3: 75% of employer contribution, up to $1,000
- Year 4: 50% of employer contribution, up to $1,000
- Year 5: 25% of employer contribution, up to $1,000
If your business has 51-100 employees, the credit works slightly differently and at a lower percentage. Check the IRS's schedule for more specific guidance or consult with a tax professional to figure out your exact credit amount.
Military Spouse Credit
Businesses with 1-100 employees can claim up to $500 a year for three years when they hire a military spouse as a NHCE. The spouse must join your plan within two months of starting, get employer contributions, and be fully vested to be eligible for the full credit. Ask your tax professional to confirm that your business qualifies.
Tax Credits SECURE Act 2.0 Summary
| Tax credit | Businesses who qualify | Maximum amount |
|---|---|---|
| Plan startup cost credit | 1-100 employees with at least 1 NHCE employee in the plan | 100% of costs, up to $5,000/year for 3 years |
| Automatic enrollment credit | 1-100 employees that add automatic enrollment | $500/year for 3 years |
| Employer contribution credit | 1-100 employees; applies to workers earning under $110,000/year | Up to $1,000 per employee for your first 50 employees, phasing down over 5 years |
| Military Spouse Credit | 1-100 employees; applies if the military spouse is an NHCE and participates in the plan | Up to $500 for the first 3 years of the spouse's plan participation |
If you are starting your business' first 401(k) plan and have less than 100 employees, you can qualify for up to $16,500 in tax credits over the first three years to offset setup and administration charges for the maintenance of your plan.
See how our plan costs compare once these tax credits are applied.
Does My Business Need SECURE Act 2.0 Automatic Enrollment?
Automatic enrollment is required for most 401(k) plans established on or after December 29, 2022, for plan years beginning in 2025 or later, under IRS regulations. Plans in place before that date are exempt.
Which Businesses Are Exempt from Automatic Enrollment
- Businesses with 10 or fewer employees
- Businesses less than 3 years old
- Church and government plans
- SIMPLE 401(k) plans
- Plans established before December 29, 2022
How Automatic Enrollment Works
Eligible employees who haven't made their own election are enrolled at an initial rate of at least 3%, capped at 10% to start. That rate rises 1 percentage point a year until it reaches at least 10%, up to a maximum of 15%. Employees can opt out or change their rate at any time.
A ShareBuilder 401k Safe Harbor plan comes with automatic enrollment and automatically satisfies IRS testing. If you're curious about the employee perspective, see our guide to how 401(k) enrollment works for the employee-side view.
How to Comply with Automatic Enrollment
Four steps help you meet the automatic enrollment rule:
- Set up payroll to take the default rate and raise it each year. A 401(k) plan with proper payroll integration can help make this easy.
- Pick a default investment for employees who don't choose one. ShareBuilder 401k provides a number of model portfolios eligible for this requirement.
- Send employees the required notice before the first deduction. It must explain the default rate and their right to opt out.
- Fix mistakes fast. If you miss an employee or use the wrong rate, correct it and make up any missed contributions.
SECURE Act 2.0 Part-Time Employees and Plan Eligibility
SECURE Act 2.0 shortened the wait for part-time employees to join your 401(k). For plan years that begin after 2024, your plan can't make them wait more than two years once they work a certain number of hours in your business. Before, the wait was three years.
A part-time employee must be allowed to join after they:
- Work at least 500 hours in a 12-month period
- Do it again the next 12-month period
Your plan administrator can help you track hours and let you know when someone qualifies.
What are the SECURE Act 2.0 Catch-Up Contributions Rules?
SECURE Act 2.0 raised catch-up contribution limits for savers aged 60 to 63. It also requires high earners to make catch-up contributions as Roth instead of pre-tax. Your plan needs a Roth option for those employees to keep making catch-up contributions.
A Higher Limit for Ages 60 to 63
Employees age 60 to 63 can now make a larger catch-up contribution than other age brackets. See our 401(k) contribution limits guide for current amounts, as the IRS typically adjusts limits every year.
Roth Catch-Up Rule for High Earners
Since January 1, 2026, employees ages 50 and over who earned more than the IRS high income threshold in the prior year must make catch-up contributions as Roth, not pre-tax. If your plan doesn't offer a Roth option yet, this group can't make catch-up contributions until you add one.
Ready to save on costs? Compare your plan to ShareBuilder 401k.
Optional SECURE Act 2.0 Plan Features
SECURE Act 2.0 also lets you add features to your plan. None are required, and not all providers support each feature.
Your options include:
- Matching employees' student loan payments
- Adding an emergency savings account
- Offering small gift card incentives
SECURE Act 2.0 Student Loan Match
You can match an employee's student loan payments as if they were 401(k) contributions. That helps workers who can't save while paying off loans. The match must be open to everyone who is eligible for your regular match.
SECURE Act 2.0 Emergency Savings Accounts
Your plan can link an emergency savings account to the 401(k). Employees who are not highly paid save after-tax money in it and can take it out for emergencies. The IRS has issued rules to stop misuse.
Small Gift Card Incentives
Plans can offer a small reward, like a gift card, to encourage employees to start saving. The reward can't be paid from plan assets. It also can't be an employer match.
Learn how a 401(k) match works before you add one.
SECURE Act 2.0 Rules for Small Balances and Lost Accounts
SECURE Act 2.0 Cash-Out Limit
Your plan can cash out balances of up to $7,000 (as of 2026) for former employees. If the balance is over $1,000, the plan must move it into an IRA in the employee's name. Ask your plan administrator for more details.
Retirement Savings Lost and Found Database
The Department of Labor runs a free online database to help people find old 401(k) accounts. Plan administrators send plan details to it. Former employees can search it after they verify their identity. Our guide on what to do with an old 401(k) can help, too.
SECURE Act 2.0 Plan Amendment Deadline
Your plan document must be updated for SECURE Act 2.0. For most plans, the deadline is December 31, 2026. Your plan provider usually handles this paperwork, so ask them to confirm yours is done.
Retroactive Amendments for Employer Contributions
After a plan year ends, you can now amend your plan to raise certain employer contributions for that year. This lets you decide if you want to increase your match after you see how the year went. Ask your provider which contributions qualify and when you must act.
Paper Benefit Statements
Starting with plan years that begin after 2025, 401(k) plans must send at least one paper benefit statement each year. The Department of Labor has proposed letting plans skip paper for employees who get statements online and don't ask for paper. Check with your provider on how your plan handles this.
What SECURE Act 2.0 Changes Are Still Ahead?
A Saver's Match Arrives in 2027
Starting in 2027, a new Saver's Match replaces the Saver's Credit for eligible lower-income savers, giving them a federal matching contribution of up to 50%, capped at $1,000 per person, deposited directly into their retirement account. Eligibility depends on filing status and income, and the IRS will calculate it. This doesn't change anything you need to do as an employer, but it's worth mentioning to employees.
401(k) Withdrawals for Long-Term Care Insurance
For distributions after December 29, 2025, businesses can add an optional feature letting employees withdraw funds for long-term care insurance premiums. Withdrawals are exempt from the 10% early withdrawal penalty, though still taxable, and can't be rolled over. The deadline to amend your plan document for this feature has been extended to December 31, 2027. This is separate from the general plan amendment deadline covered above.
SECURE Act 2.0 RMD Age Keeps Rising
The required minimum distribution (RMD) age is 73 now. Starting in 2033, it rises to 75 for people who turn 74 that year or later. Roth 401(k) balances aren't subject to RMDs during the owner's lifetime, matching how Roth IRAs already work.
What Should Your Business Do Next?
SECURE Act 2.0 gives small businesses tax credits to claim now and rules to plan for. Here's a short checklist to help sort out what applies to you:
- Check whether you qualify for the startup, contribution, and automatic enrollment credits
- Find out if your new plan must use automatic enrollment
- Confirm your plan offers a Roth option for catch-up contributions
- Ask your provider whether your plan document is updated before the deadline
Know that a good plan provider should keep track of these rules and handle most of the paperwork for you.
FAQ
Is SECURE Act 2.0 Still in Effect?
Yes, SECURE Act 2.0 is still law and is still rolling out across several years. Some provisions, like the bigger startup tax credits, took effect immediately, while others are still phasing in. This includes automatic enrollment, the Roth catch-up rule, and the new Saver's Match. None of them have ever been repealed.
What Is the Small Business Tax Credit for Starting a Retirement Plan?
It's a federal tax credit covering 100% of your plan's setup and administration costs for the first three years, up to $5,000 a year, for 50 or fewer employees, per IRS Publication 560. Businesses with 51 to 100 employees claim half that. Adding automatic enrollment adds another $500 credit each year for three years.