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By James Pruitt, Senior Staff Writer

The Secure Act 2.0 called RISE and Shine passed in June of 2022 in the Senate. The bill had already passed in March of 2022 in the House of Representatives and introduces new responsibilities on employers for providing for their workers’ retirement. 

Legislation already exists that establishes standards for employer-funded retirement programs. ERISA regulates existing pension, benefit, and retirement plans. ERISA does recognize the increased burden of retirement plans on small businesses. 

The law imposes certain requirements for businesses with 1 – 99 employees, and additional requirements for employers with 100 or more employees. Among other responsibilities, under ERISA employers need to provide a “summary plan document” for each benefit and notify employees regularly of their rights and responsibilities. In other words, ERISA requires that employers keep employees informed about the status of their pension and benefits while setting out the responsibilities of plan administrators.

Enter the Secure Act 2.0, which covers employers who offer 401k and 403b plans. The Secure Act changes the game by incentivizing the wider use of retirement programs, especially by small businesses. Currently, relatively few smaller companies offer these plans. Hence, the difference between ERISA and the Secure Act is the following: while ERISA predominantly imposes additional requirements on companies that administer these programs, the Secure Act compensates by reducing the burden on smaller companies. 

The original Secure Act became law in 2019. This legislation streamlined the duties of benefits administrators while incentivizing wider enrollment in retirement programs. The second version seems due for enactment at the end of 2022.  

The new Secure Act will impose some additional responsibilities. One new rule may require businesses to automatically enroll employees. Exceptions might include:

  • Small businesses with 10 employees or fewer,
  • New businesses that have been in business for less than three years,
  • Religious organizations,
  • Governmental bodies.

On a positive note, the legislation also provides incentives to offer a healthy benefits package. These incentives may include: 

  • Tax incentives for establishing retirement programs,
  • Significant among these tax incentives, businesses with 50 or fewer employees will be eligible to claim 100% of the benefits paid. This added benefit enhances the existing benefit, which allows companies with 100 or fewer employees a credit of 50% of expenses. Hence, the existing tax benefits for small businesses will include even greater benefits for still smaller companies
  • Increased starting age for distributions, up from the current 72 years for relevant plans. The minimum starting age would increase yearly to 73 in 2022, 74 in 2029, and 75 in 2032. These increases in the minimum age would make retirement plans viable for a larger group of businesses.

Remember the difference between an IRA and a 401k. The prospective retiree opens an IRA on their own, although employers can sometimes contribute. 401K programs, however, are employee sponsored. The new Secure Act legislation affects both. Veteran Business Owners who choose to provide benefits or pension plans need to verse themselves in the relevant legislation in order to take advantage of these valuable new opportunities.

VAMBOA, the Veterans and Military Business Owners Association hope that this article has not only been valuable but provided some unique perspective.  We work hard to bring you important, positive, helpful, and timely information and are the “go-to” online venue for Veteran and Military Business Owners.  VAMBOA is a non-profit trade association.   We do not charge members any dues or fees and members can also use our seal on their collateral and website.   If you are not yet a member, you can register here:  

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