40 APRIL 2023 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Affordable Revamped Worker Retirement Plans Uncle Sam will pay a drilling business, or at least reduce their tax bills, to create a retirement plan for their workers. That’s right, a recently passed retirement reform law has increased the three-year startup tax credit to 100% of the business’s retirement plan administrative costs, up from the former 50% with an annual maximum of $5000 for employers with up to 50 employees. Last year’s SECURE 2.0 Act, which increased the three-year small employer plan startup tax credit to a full 100% for some employers, also extended the startup tax credit to employers who join so-called “Multiple Employer Plans” based on the year they join rather than if they only join a new plan. There’s also a tax credit, this one for employer contributions to these plans. Although small business plans rarely cost in excess of $5000 a year to administer, the government’s latest incentive effectively makes the plan setup free for the first three years. Small businesses with up to 100 employees could receive a tax credit on their employee-matching or profit-sharing contributions. This credit is capped at $1000 per employee and phases out after five years. Businesses with 51 to 100 employees face further reductions. The SECURE 2.0 Act, a follow-up to 2019’s SECURE, Setting Every Community Up for Retirement Enhancement, Act is legislation specifically designed to reshape the retirement plan landscape with more than 90 changes to retirement account laws and administration. Here are some highlights: * Beginning in 2025, workers between the ages of 60 through 63 will get the option to make special catch-up contributions of up to $10,000 toward their workplace retirement plans like 401(k)s. * The required minimum distribution (RMD) age will increase to 73 this year, then to 75 in 2033. * Starting in 2024, employers may provide their employees with 401(k) contribution matches based on their workers’ student loan payments. * Beginning in 2024, plan sponsors can create “emergency savings accounts” which allow employees to make Roth after-tax contributions to special savings accounts within their retirement plans so in-demand in today’s job market. While bringing retirement plans within the reach of every drilling contractor, professional assistance might be needed. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com
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