On December 29, 2022, the Act known as “Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022” was signed into law by President Biden. Wouch Maloney & Company have outlined a few of the Provisions of this Law that have taken effect as of January 1, 2023.
Small Employer Pension Credit
A significant change includes, allowing small businesses of 50 employees or fewer to increase their Small Employer Pension Plan Start up credit from 50% to 100% of qualified start-up costs. Businesses with 51-100 employees will continue to keep their Small Employer Pension Plan Start-up Credit of 50% of qualified start-up costs. The Annual cap of this credit, in either case of the businesses size is $5,000. The small employer Pension Credit is available for the first three tax years of the plan’s existence.
Credit for Employer Contributions
This act allows a credit for employer contributions to small employer pensions for the first five tax years beginning on the plans start date. This credit amount would increase the Small Employer Pension credit by the applicable percentage of the employer contributions but would cap at $1,000 per employee. The applicable percentage for the first and second year is 100%, 75% for the third year, 50% for the fourth year, and 25% for the fifth year. For Employers that have more than 50 employees, a reduction of 2% multiplied by the number of employees excess of 50 by the amount of the credit. No credit is allowed for employer contributions if the employer has more than 100 employees. In addition, no credit is allowed for employer contributions on behalf of an employee who makes more than $100,000.
Multiemployer Plan Rule
This act made a revision that allows employers joining multiple employer plans to take a portion of the Small Employer Pension Credit for qualified start up costs for the first three years after they join a Multiemployer plan, regardless how long the Multiemployer plan has existed. Previously, one could not take the credit if the multiemployer plan had existed more than three years prior to the employer joining.
Increased Age of Required Mandatory Distributions
This provision increases the required beginning date for Required Mandatory Distributions (RMDs) for 401(k) and IRAs to the age of 73. Previously, the required beginning date of these RMDs was 72.
Should you have questions about this topic, or any other topics related to your personal or business situation, please contact us at any time.
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