This post is sponsored by RUN Powered by ADP® Platform. All opinions expressed are my own.

Offering retirement benefits might seem like something only big corporations can afford, but what if I told you it’s more accessible and affordable than you think? As a small business owner, setting up a retirement plan for your employees can help attract top talent, improve retention, and boost employee morale—all while offering some serious tax perks.

In this blog, I’ll share how small businesses can take advantage of tax credits under the Secure Act 2.0, why retirement plans are worth the investment, and how I used the RUN Powered by ADP® platform to seamlessly set up a 401(k) plan for my team.

Why Offer Retirement Benefits as a Small Business?

Retirement benefits are a game changer for both your employees and your business. For employees, it’s an opportunity to build long-term wealth. For employers, it’s a chance to stand out in a competitive job market. However, many small business owners shy away from offering these plans because they think it’s too expensive or too complicated.

Here’s the truth: Setting up a retirement plan is easier and more affordable than you might think, thanks to new legislation and the availability of user-friendly platforms.

Choosing the Right Retirement Plan

The first step is choosing the type of retirement plan that makes the most sense for your business. Here are some common options:

• SEP IRA: Ideal for sole proprietors or small businesses with no employees.
• Solo 401(k): Perfect for one-person businesses, with or without a spouse.
• Traditional 401(k): Best for businesses with employees, offering flexibility for matching and profit-sharing contributions.

For my small business, I opted for a traditional 401(k) plan because it offered the most flexibility for matching contributions and profit sharing.

Where to Start? Begin with Your Payroll Provider

If you’re already using a payroll provider, that’s the best place to start. Many payroll platforms, like the RUN Platform, offer retirement solutions that integrate seamlessly with payroll.

Here’s why this matters:

• Ease of Use: Payroll integration simplifies employee contributions and tax withholdings.
• Streamlined Administration: Everything is managed in one place, saving you time and stress.
• Support Options: Providers like ADP offer guidance to help you select and set up the right plan.

Discovering Tax Credits: A Game-Changer

Here’s where things get really exciting—tax credits can significantly offset the cost of starting and maintaining a retirement plan for your small business.

Tax Credits vs. Tax Deductions

While tax deductions lower your taxable income, tax credits are even more powerful because they provide a dollar-for-dollar reduction in your tax bill.

For example:

• A $5,000 tax deduction at a 20% tax rate saves you $1,000 in taxes.
• A $5,000 tax credit saves you the full $5,000.

Tax Credits Under the Secure Act 2.0

The Secure Act 2.0 introduced generous tax credits specifically for small businesses setting up retirement plans. Here are the highlights:

1. Startup Costs Credit:
   • Businesses with fewer than 50 employees can claim up to $5,000 per year for the first three years to cover startup and administrative costs.
   • If you spend $2,000 on administrative costs in a year, you’ll get the full $2,000 reimbursed as a tax credit.
2. Employer Contribution Credit:
   • You can claim a credit for up to $1,000 per employee for matching contributions.
   • This credit phases out over five years (100% for the first two years, then gradually reduced).
3. Auto-Enrollment Credit:
   • If your plan includes an auto-enrollment feature, you’re eligible for an additional $500 tax credit.
4. Military Spouse Credit:
   • Businesses that hire and enroll military spouses in their plans can claim an additional $500 per spouse, provided the plan meets specific criteria like immediate vesting.

How I Set Up My Retirement Plan Using RUN Powered by ADP® Platform

To get started, I contacted my payroll provider, RUN Powered by ADP Platform, and was pleasantly surprised by how easy the process was. Here’s how it worked:

1. Exploring Plan Options: The RUN Platform provided several plan options, including a traditional 401(k), SEP IRA, and more.
2. Seamless Integration: The platform integrates retirement contributions directly with payroll, so everything happens automatically.
3. Tax Credit Assistance: The ADP team guided me on how to maximize tax credits, saving me thousands of dollars.

How to Claim Your Tax Credits

To take advantage of these credits, you’ll need to file IRS Form 8881 with your business taxes. Whether you’re filing as a sole proprietor, LLC, or S-corp, this form will help you calculate and claim your credits.

Make sure to discuss this with your tax preparer to ensure you’re filing correctly and maximizing your savings.

Bonus Tip: Stack Your Tax Credits

One of the best-kept secrets is the ability to stack tax credits. Here’s how:

• Combine the startup costs credit with the employer contribution credit for maximum savings.
• Add the auto-enrollment credit for even more tax relief.

For example, if your plan costs $3,000 to administer and you contribute $1,000 for three employees, you could claim:

• $3,000 for administrative costs.
• $3,000 for employee contributions ($1,000 per employee).
• $500 for auto-enrollment.

That’s a total of $6,500 in tax credits in your first year!

Why Now is the Time to Act

These tax credits aren’t going away anytime soon, but there’s no reason to wait. The longer you delay, the more time you miss out on the opportunity to invest in your employees’ futures while saving on taxes.

Ready to Get Started?

If you’ve been considering offering retirement benefits to your team, there’s never been a better time. With user-friendly solutions like RUN Powered by ADP Platform and the generous tax credits available, setting up a retirement plan has never been easier—or more affordable.

Take the first step toward offering retirement benefits and maximizing your tax savings by checking out the RUN Powered by ADP Platform.

👉 Click here to get started with the RUN Platform and enjoy three months of free payroll!

By investing in a retirement plan for your employees, you’re not just enhancing your business—you’re changing lives. Let the Secure Act 2.0 and platforms like RUN Powered by ADP® Platform make it easier than ever.

This post may contain affiliate links, which means I may earn a small commission if you make a purchase through these links at no additional cost to you (in fact, using our links can typically SAVE you money). We appreciate you supporting our small business by using our links!

This transcript is a direct representation of spoken words from the original video and has not been edited for content. However, it has been formatted for readability. Please excuse any grammatical errors, repetition, or informal language, as these are natural elements of conversational speech.

What if I told you that you could offer a retirement plan for your employees for way less than you might have thought and make your small business an even more desirable place to work? You probably already know that offering retirement benefits is a great way to boost employee morale, to improve retention, and to attract top talent.

But perhaps you think your business is just too small. But here’s the good news. Setting up a retirement plan is a lot easier and cheaper than you probably think it is, even if you only have a few employees. Today, I’m going to tell you how to do it and let you in on some little-known tax credits that can reimburse you for most, if not all, of the cost of setting up your plan.

And I’m going to tell you a little bit about my personal journey opening up a retirement plan for my employees last year, which I did through the RUN powered by ADP platform. And I’m very thankful to the RUN platform for sponsoring this video so that I can bring this information directly to you. And make sure to stick around until the end of this video, where I’m going to teach you a bonus tip all about stacking these tax credits to make your retirement plan even more affordable.

But first, what type of retirement plan should you set up? Now, this is really going to depend, and there are lots of different types of retirement plans out there, so you’ll definitely want to talk to a financial advisor to figure out what makes the best sense for you. So there are lots of different options, including your traditional 401k plan, a SEP IRA, maybe a solo 401k—there are many different ones to pick from.

Now if you don’t yet have employees, something like a SEP or a solo 401k might be a better option for you. They are typically going to be lower cost and easier to administer. But if you have employees, personally, I’m a fan of the traditional 401k. This is typically what big corporations are able to offer. This is where you’re going to have more flexibility in terms of matching or even profit sharing. There are so many things that you can do with a traditional 401k, and because that’s what I set up for my employees, that is what I’m going to be speaking more towards during this video. However, know that the vast majority of the tax credits that I’m talking about could apply to various different plans depending on your situation.

But the big question is, how do you even go about getting this all set up? And this is one that stops a lot of small business owners in their tracks, and this was me for a long time. I just assumed it was going to be complicated and take a whole bunch of time, and I also thought it was going to be expensive, which I’ll talk about a little bit later.

However, I had all these preconceived notions of what it would be like to open a retirement plan. And that’s especially true because I’m a company that has only three employees plus myself. So I really was wondering if it was going to be worth doing. However, I made the decision to look into it. And the reason that I did that is because I have a financial literacy company, and it felt kind of out of congruence to not be offering some way for my employees to build wealth for their future.

So I really wanted to be able to offer this to them, even though we’re a very small company. So, where did I start? I started with my payroll provider. So, I highly recommend going to the payroll provider you already use, especially if you are happy with them, and seeing what type of retirement plan solutions they might offer.

And the benefit to doing that is it’s all in one platform. There’s integration already built in with your payroll as far as things like withholding and everything like that. So, it just felt like a really natural place to start. So because I use the RUN platform for my payroll already and I’m very happy with them and their service, I decided to start there when looking for retirement plan solutions, and voila, they had lots of options for me.

Now the interesting thing is, even though I’m a CPA, I started the process of looking into this before I even had any idea that there were tax credits available to be able to help you with this. And the more I looked into it, the more I was shocked that this is not talked about more. The Secure Act 2.0 was recently passed. That changed a lot in terms of what’s available for small businesses to help them get started offering retirement plans to their employees.

Now really quickly, before we go farther, I want you to understand the power of tax credits versus tax deductions, right? If you are offering a plan and you have expenses related to getting that plan started up or you’re administering the plan, of course all of those expenses are going to be deductible as a business expense. That is a given. And again, that’s generally going to be true for employer matches that you’re doing on behalf of your employees as well. And tax deductions are all well and good. But again, all that really does is it reduces the amount of income that is taxable.

So for example, when you’re talking about a $5,000 tax deduction, that means it’s reducing your taxable income by $5,000. So let’s say your effective tax rate is 20%, then that $5,000 deduction times that 20 percent is how much you actually save in taxes. So in this case, about $1,000. Now, that’s not anything to sneeze at, and we need to make sure that we are claiming all of our deductions. However, tax credits are the best. As a CPA, tax credits blow tax deductions out of the water.

And that’s because a tax credit is a dollar-for-dollar reduction in the taxes you owe. So a $5,000 tax credit actually reduces your taxes by that full $5,000. So when I get all giddy talking about tax credits on here, make sure you know that tax credits are way better than deductions. That’s why I geek out about them.

So what that essentially means is that if you get a tax credit for something you spent money on, you’re essentially getting it fully reimbursed by the government. And this is why the Secure Act 2.0 tax credits are so powerful because they can essentially pay you back for a lot of the expenses of opening up and maintaining a retirement plan and potentially even some of the expenses that you have for matching your employees’ contributions.

So let’s get into it. How do you know if you qualify? Well, as with anything, there’s lots of ins and outs to it. You could talk to a tax advisor. That’s a great idea. But also, I’m going to be speaking specifically to some of these credits that relate to those of you who have less than 50 employees. And, believe it or not, some of the best tax credits are available for those smaller companies. Even if you only have two or three or four employees, this would apply to you.

Now, if you’re wondering if this applies to you, if you are your only employee, well, more than likely, most of this is not going to apply. This law is really meant for those who are opening up employer-sponsored plans for their employees, not just for themselves. So there can be some benefits that you may get out of this. However, importantly, this is really meant for those of you who have employees outside of yourself and likely outside of family as well.