McKee Financial

7-20-2020 Newsletter: SECURE Act Changes That Matter to Small Employers

SECURE Act Changes That Matter to Small Employers

Many people who work for small businesses don’t have access to retirement benefits. The SECURE Act includes provisions that could make it easier and more affordable for business owners to provide retirement plans and help their employees save money for retirement.

Here are some of the specific rule changes that could affect small businesses starting in 2020.


Retirement Plan Tweaks


To help workers track their progress toward retirement income goals, employers must provide participants in defined contribution plans with annual statements that estimate how much their retirement plan assets would provide on a monthly basis if converted into a lifetime income stream. In addition, auto-enrollment safe-harbor plans may now automatically increase participant contributions until they reach 15% of salary. (The previous ceiling was 10%.)

For plan years beginning on or after January 1, 2021, part-time workers age 21 and older who log at least 500 hours for three consecutive years generally must be allowed to contribute to a qualified retirement plan. (The previous requirement was 1,000 hours and one year of service.) However, these participants may be excluded for nondiscrimination testing purposes, and employers will not be required to make matching or nonelective contributions on their behalf.


Open MEPs Explained


Effective January 1, 2021, employers will be able to offer retirement plans by joining multiple employer plans (MEPs) regardless of industry, geographic location, or affiliation.

“Open MEPs,” as they have become known, offer economies of scale, allowing small employers access to the types of pricing models and other benefits typically reserved for large organizations. (Previously, groups of small businesses had to be related somehow in order to join an MEP.)

The legislation also eliminates the “one bad apple” rule. This change means that the failure of one employer in an MEP to meet plan requirements will no longer cause others to be disqualified.












Bigger Incentives


The tax credit that small businesses can take for starting a new retirement plan has increased. Employers can take a credit equal to the greater of (1) $500 or (2) $250 times the number of non–highly compensated eligible employees or $5,000, whichever is less. The previous credit amount allowed was 50% of startup costs up to $1,000 ($500 maximum credit).

There is also a new tax credit of up to $500 for employers that launch a SIMPLE IRA or 401(k) plan with automatic enrollment. Both of these tax credits are available for three years.


This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2020 Broadridge Investor Communication Solutions, Inc.



Interesting Economic Facts


LAST MONTH, LAST YEAR - The US government suffered an $864 billion budget deficit during June 2020, i.e., $241 billion of tax receipts vs. $1.1 trillion of outlays. The US government had a $984 billion budget deficit for the entire 2019 fiscal year, i.e., the 12 months ending 9/30/19 (source: Treasury Department).


SPENDING DECLINES AS WE AGE - The average retired couple spends 23% less money in their 6th year of retirement compared to w hat they spent in their 1st year of retirement (source: Health and Retirement Survey).


BLAME IT ON COVID-19 - Crude oil production in the United States has fallen from 13.1 million barrels a day as of Friday 3/13/20 (the day President Trump declared a pandemic-driven national emergency) to 11.0 million barrels a day as of Friday 7/10/20 (source: Department of Energy).


THIS FALL - 57% of colleges anticipate they w ill offer “inperson” class instruction for the upcoming 2020-21 school year, just 9% w ill offer only online class instruction, w hile 29% of schools w ill provide a combination of “in-person” and online class instruction. The remaining 5% of schools have yet to decide as of Friday 7/10/20 (source: Chronicle of Higher Education).


ROTTEN THINGS HAPPEN - 46% of 1,500 US adults interviewed online during the first w eek of July 2020 are “very worried” or “somewhat worried” about losing their job (source: Economist/YouGov Poll).


WHO HAS A JOB? - The number of employees of the federal governmenthas increased by 18,000 from the end of February 2020 to the end of June 2020, w hile the number of employees of local governments has declined by 1.2 million over the same 4-month period (source: Department of Labor).


END OF THIS WEEK - The extra $600 per week of federally funded unemployment benefits that w as provided in the 3/27/20 CARES Act runs out as of Saturday 7/25/20 or Sunday 7/26/20, depending upon the state of residence of the out-of-work individual. Statefunded jobless benefits continue for at least 30 weeks in 46 of the 50 US states (source: CARES Act).


IT CAN WAIT – An estimated 40% of American adults at least age 18 have delayed getting medical care over the previous month as of 7/15/20 due to the COVID-19 pandemic. American adults make up 249 million of our 330 million population (source: Census Bureau).


CAN’T TOUCH ME - As of 7/09/20, an estimated 25% of the 5.4 million renters in New York City have not made a monthly rental payment since March 2020. A 3/27/20 federal moratorium prevents NYC landlords from evicting delinquent tenants or charging them late fees (source: Community Housing Improvement Program).


STATES WILL NEED HELP - From 3/13/20 (the date of President Trump’s declaration of a national emergency) to 6/30/20, the COVID-19 pandemic reduced state revenue across the country (e.g., state income tax and sales tax) by an estimated $75 billion. For the 2021 fiscal year that began on 7/01/20 for most states, the 50 US states w ill experience an additional revenue reduction of an estimated $125 billion (source: Tax Policy Center).


WE NEED JUST ONE - There are 197 vaccines for the COVID-19 pandemic currently in the development stage, none of w hich has yet to receive FDA approval (source: Milken Institute).


BRAD PAISLEY’S BUDDY - Former NFL quarterback Peyton Manning earned $3.4 million from advertisements and royalties for the 1-year ending 2/29/20, more than w hat any current or former NFL player earned over the same time period. Manning last played on 2/07/16 in Super Bowl # 50 (source: NFL Players’ Association).


...and for the History Lovers... This Week in History


July 20, 1969

Neil Armstrong and Edwin "Buzz" Aldrin become the first men to walk on the moon.


July 21, 1865

Wild Bill Hickok kills gunman Dave Tutt in Springfield, Missouri, in what is regarded as the first formal quick-draw duel.


July 22, 1894

The first automobile race takes place between Paris and Rouen, France.


July 23, 1903

The Ford Motor Company sells its first automobile, the Model A.


July 24, 1974

The Supreme Court rules that President Richard Nixon must surrender the Watergate tapes.


July 25, 1984

Svetlana Savitskaya becomes first woman to perform a space walk.


July 26, 1948

In an Executive Order, President Harry Truman calls for the end of discrimination and segregation in the U.S. armed forces.


Neil Armstrong was a graduate of Purdue University where he studied Aeronautical Engineering.  Great story on Neil:



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