7 SECURE 2.0 Provisions to Boost Small Business Retirement
February 14, 2024
7 SECURE 2.0 Provisions to Boost Small Business Retirement

The Securing a Strong Retirement Act of 2022 (SECURE 2.0) has emerged as a significant milestone to improve small businesses’ access to retirement benefits. SECURE 2.0 builds on the initial 2019 SECURE law. The act focuses on retirement savings, such as 401(k) and 403(b) plans and individual retirement accounts (IRAs). The comprehensive rule was enacted on Dec. 29, 2022, and many of its provisions apply specifically to small businesses with 100 or fewer employees.


A survey by ShareBuilder 401k revealed that only one-quarter (26%) of small businesses offer 401(k) plans. Many respondents stated that they didn’t offer plans because they thought their business was too small to qualify, they couldn’t afford to match contributions, and retirement plans were too expensive to set up and manage. Fortunately, by embracing new provisions offered through SECURE 2.0, small businesses can better support workers’ retirement plans.


This article explores key aspects of SECURE 2.0 that small businesses should be aware of and suggests how they can use them to their advantage.


Understanding SECURE 2.0 Provisions

Congress’s passing of SECURE 2.0 is meant to improve small businesses’ access to retirement benefits, improve retirement rules and encourage more retirement savings. The act contains more than 90 retirement-related provisions, so consider these seven favorable provisions impacting small businesses:


1. Startup credit—The startup credit will cover 100% (up from 50%) of administrative costs up to $5,000 for the first three years of plans 1.    established by employers with up to 50 employees. Small businesses joining a multiple employer plan (or MEP) are also eligible for the credit. The tax credit offering incentivizes employers by limiting the administrative burdens of establishing and managing retirement plans.


2. Starter 401(k) plans—Starting in 2024, employers who don’t already offer retirement plans can offer a starter 401(k) or safe harbor 403(b) plan to employees who meet age and service requirements. The starter plan provides an ideal first step for small businesses since employers aren’t required to match contributions. With this provision, even the smallest businesses can offer their employees something to help with retirement. Through this provision alone, the American Retirement Association estimates that 19 million workers will gain access to a workplace retirement plan.


3. Automatic enrollment—Beginning in 2025, many 401(k) and 403(b) plans will be required to enroll eligible participants automatically; however, employees may opt out of coverage. Remember, there’s an exception for small businesses with 10 or fewer employees and new businesses under 3 years old. The expansion of automatic enrollment is meant to help workers—especially younger and lower-paid workers—save for retirement.


4. Required minimum distribution (RMD)—At a certain age, savers must start withdrawing a minimum amount from specific retirement accounts, including 401(k) and traditional IRAs. Since Jan. 1, 2023, a provision for later-stage savers increased the RMD age to 73—and, in 2033, the RMD age will increase to 75. Furthermore, starting this year, Roth contributions won’t be included when calculating the RMD.


5. Part-time worker offerings—Starting in 2025, employers will be required to allow part-time employees with more than 500 hours per year after two consecutive years of service to participate in their retirement plan. Employees exceeding 1,000 hours of service will be included in plans after one year of service. This will increase the number of workers eligible to contribute to employer-sponsored retirement plans.


6. Student loan matching—Individuals with student loans can balance saving for retirement and repaying student loans instead of choosing one or the other. Starting in 2024, when a borrower makes a qualified student loan repayment, their employer may match that amount by contributing to a 401(k) plan, 403(b) plan or SIMPLE IRA.


7. 529 plans—A 529 plan (or college savings account) is a tax-advantaged plan used to pay for education expenses. Starting January 2024, 529 beneficiaries can roll up to $35,000 to a Roth IRA from a 529 plan if it’s been open for at least 15 years. Previously, 529 accountholders faced taxes and penalties for nonqualified withdrawals, so this change allows beneficiaries to roll leftover 529 funds (e.g., unused educational funds) to the beneficiary’s Roth IRA to help save for retirement.


SECURE 2.0 changes may help American workers save for retirement while balancing current expenses. In turn, these changes also allow small businesses to support their employees with retirement savings, which can improve their attraction and retention efforts.


Summary

With most American workers employed by small businesses, employers must be empowered with the tools and resources to offer workers retirement options. Although complex, SECURE 2.0 presents many opportunities for small businesses to strengthen their employee benefits and support the overall financial well-being of their workforce.


It’s critical for employers to stay informed on SECURE 2.0 changes and be proactive in their adoption. Contact us today for more workplace guidance.

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Top 5 HR Trends That Will Shape Businesses in 2025

January 7, 2025
As 2025 kicks off, the HR landscape is evolving faster than ever before. Technology, shifting workforce expectations, and the need for businesses to be agile in a dynamic global environment are all driving change. What worked yesterday may not be enough today, and companies must adapt to stay ahead. Here are the top five HR trends you’ll need to watch closely in 2025: 1. AI is Changing the Hiring Game Artificial intelligence is no longer just a buzzword in HR—it’s a game-changer. Tools that can scan resumes, match candidates to roles, and even conduct initial assessments are becoming staples for businesses aiming to save time and improve hiring outcomes. In 2024, many organizations began integrating AI to remove unconscious bias and make their hiring practices more inclusive, and this trend is expected to accelerate. 2. Flexibility Isn’t Just a Perk Anymore Hybrid and remote work models are here to stay, but the conversation has shifted. In 2025, it’s less about offering flexibility and more about making it work effectively. Companies are adopting sophisticated tools for remote collaboration, redefining performance metrics, and ensuring policies address the nuances of managing both in-office and remote teams. The focus is on maintaining productivity without compromising employee well-being. 3. Wellness Goes Beyond Gym Memberships In recent years, wellness programs have evolved beyond basic offerings like gym memberships to address a wider range of employee needs. As companies recognize the link between employee well-being and productivity, they’re broadening their focus to include mental health, financial stability, and holistic support. In 2023 and 2024, for example, Delta expanded its employee wellness initiatives by improving access to mental health care. The airline worked with Spring Health, a new EAP provider, to create a larger and more diverse network of mental health professionals, offering better support for both employees and their household members. Looking ahead to 2025, wellness will become more deeply integrated into company cultures. Expect companies to go beyond providing reactive support to fostering proactive wellness through personalized tools, such as mental health apps, financial coaching, and enhanced benefits like paid leave for caregiving. With these programs, businesses are not just addressing immediate health concerns but also empowering employees to manage their overall well-being in a more holistic way. The focus will be on creating a supportive, sustainable work environment that helps employees thrive both at work and in their personal lives. 4. Upskilling is a Competitive Necessity Technology is evolving faster than ever, and companies are racing to keep up. Upskilling employees in areas like data analysis, AI, and emerging tech became a priority in 2024, and it’s clear that this trend will only grow. Businesses that invest in continuous learning programs—whether through certifications, on-the-job training, or digital learning platforms—are better positioned to stay ahead in their industries. 5. Data is Driving HR Decisions HR is leaning heavily on people analytics to guide decision-making. Instead of relying on intuition, businesses are using data to understand employee engagement, pinpoint reasons for turnover, and improve productivity. The emphasis on metrics like employee sentiment and workforce utilization gained traction last year, and more organizations are embedding analytics into their HR strategies to tackle challenges proactively. Final Thoughts The HR landscape in 2025 will be shaped by these transformative trends. Businesses that embrace innovation and prioritize their people will find themselves not just adapting but thriving in the evolving workplace. As these trends unfold, staying proactive and flexible will be the key to turning challenges into opportunities.

IRS Announces 2025 PCORI Fee Update

January 6, 2025
The IRS has released the 2025 Patient-Centered Outcomes Research Institute (PCORI) fee , which will increase to $3.47 per covered life —a $0.25 increase from 2024. This fee applies to plan years ending on or after October 1, 2024 , and before October 1, 2025 . What is the PCORI Fee? The PCORI fee was introduced as part of the Affordable Care Act (ACA) to help fund the research conducted by the Patient-Centered Outcomes Research Institute (PCORI). This research focuses on improving healthcare outcomes by comparing different medical treatments. The fee is levied on insurers, as well as self-insured and level-funded health plans. The fee is calculated based on the average number of covered lives under a plan and is due once a year, with the filing occurring during the second quarter on Form 720 , the Quarterly Federal Excise Tax Return . The payment is due by July 31 each year. Key Details for Employers and Plan Sponsors Who is Affected? : The fee applies to health insurers, self-insured health plans, and level-funded health plans. When is it Due? : The fee must be reported on Form 720 and paid by July 31 each year. How is it Calculated? : The fee is based on the average number of covered lives during the plan year. The updated $3.47 per covered life fee will be in effect for health plans with policy years ending between October 1, 2024, and October 1, 2025. Employers should be prepared to account for this increase when filing for 2025. For more information on the PCORI fee and its reporting requirements, consult the IRS Bulletin 2024-49 , published on December 2, 2024, or visit the IRS PCORI Fee page . 

Federal DOL Restores Simplified Tip Credit Rule: Employer Guidance

January 6, 2025
In a move welcomed by many employers in the hospitality and service industries, the U.S. Department of Labor (DOL) has officially reinstated the pre-2021 tip credit rule. This change, effective December 17, 2024, follows a recent court of appeals decision that vacated the “80/20/30” tip credit rule that had been implemented under the Trump administration. If you’re wondering what this means for your business, don’t worry—this update doesn’t require any immediate action on your part. What Was the "80/20/30" Rule? Before we dive into the implications of the DOL’s latest rule change, let’s quickly review the "80/20/30" rule. This rule, introduced in 2021, placed specific restrictions on how much time tipped employees (such as waitstaff and bartenders) could spend on non-tip-generating duties (e.g., cleaning, setting up, and other side work). The rule essentially required that tipped workers spend at least 80% of their work hours on tip-generating activities to continue qualifying for the tip credit. Moreover, under the "80/20/30" rule, employers could no longer use the tip credit to offset wages for certain non-tip-producing activities, and they had to ensure that employees spent no more than 30 minutes at a time on side duties. This increased the burden on employers, as it required more careful tracking of employee duties and work hours to remain in compliance. Why Was the Rule Vacated? The court of appeals decision in August 2024 ruled that the "80/20/30" rule was too restrictive and inconsistent with the intent of the Fair Labor Standards Act (FLSA), which allows employers to take a tip credit for workers who perform both tipped and non-tipped duties. The court found that the new rule created unreasonable administrative burdens and restrictions that were not in line with past practices or legal precedents. In response to this ruling, the DOL moved quickly to restore the pre-2021 tip credit rule. What Does the Reinstatement of the Pre-2021 Rule Mean for Employers? With the reinstatement of the pre-2021 tip credit rule, the DOL has effectively simplified the way employers can apply the tip credit to their workers. Under the prior rule, employees who perform a combination of tipped and non-tipped duties can still qualify for the tip credit, as long as their primary job responsibility is related to tipped work. Employers no longer have to track the precise breakdown of time spent on tip-generating vs. non-tip-generating activities in the same way. This returns to the more flexible guidelines where as long as tipped employees perform "related" duties (e.g., cleaning their station, setting up for service), they can still receive the tip credit for those hours, provided those activities don’t dominate their workday. What Action Is Needed from Employers? For most employers, this change will not require any immediate action, as the final rule effectively restores the pre-2021 approach. The main thing to note is that employers should continue to comply with the broader requirements of the Fair Labor Standards Act (FLSA) and ensure they are properly paying employees at least the federal minimum wage (including tips) when they apply the tip credit. Here are a few things to keep in mind: Reassess Timekeeping Systems: While the rule change simplifies some aspects of record-keeping, employers still need to ensure they have a timekeeping system in place that accurately tracks the hours worked by tipped employees. It is essential to ensure that the wages (base pay plus tips) equal at least the federal minimum wage. No Need for Immediate Adjustments: If you were already applying the pre-2021 tip credit rule, no changes are necessary on your part. For those who had adjusted to the "80/20/30" rule, reverting back to the previous method should not require significant changes. State and Local Laws: Employers should still be mindful of any state or local laws that may have stricter requirements than federal law. Always check your state’s labor regulations to ensure full compliance. Why Is This Change Important? The reinstatement of the simplified tip credit rule provides relief to many employers, particularly in industries like restaurants, hotels, and other service-based businesses where tipping is common. The pre-2021 rule is seen as more employer-friendly, offering more flexibility in how tipped employees can spend their time without losing eligibility for the tip credit. For employers, this means less administrative burden, reduced risk of compliance issues, and potentially fewer legal challenges. This shift is a step toward simplifying labor law compliance for businesses already struggling with the complexities of wage and hour rules. Looking Ahead As we move further into 2025, it’s important for employers to stay informed of any future changes in federal labor regulations. While this change restores a previous rule, the DOL’s stance on tip credits and wage issues can continue to evolve. Employers in tip-dependent industries should continue to monitor updates from the Department of Labor and legal rulings to ensure ongoing compliance. The DOL’s restoration of the pre-2021 tip credit rule is a welcome change for many businesses, offering a return to simpler guidelines and less restrictive requirements. For most employers, no immediate action is required, but it’s always a good idea to review your practices to ensure they align with the updated rule. If you need further assistance in navigating these changes, reach out to Simco to ensure your business stays compliant in 2025 and beyond. 

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