SECURE Act: Biggest Changes and Opportunities

The SECURE (Setting Every Community Up for Retirement Enhancement) Act was signed into law in December 2019, bringing about several important changes to retirement plans. We’ll cover some of the biggest opportunities for advisors and business owners created by this legislation in the post below.

Ch-Ch-Ch-Ch-Changes: Face the Opportunity

While the SECURE Act is fairly extensive and includes a variety of changes for retirement plans, we’re going to highlight the changes surrounding implementing a new plan. Here’s a summary of what we’ll cover more in-depth below:

  • New small business tax credits
  • Relaxed deadline for adding a new plan
  • Relaxed deadline for adopting a 401(k) safe harbor nonelective feature

New Small Business Tax Credit

The SECURE Act created a federal tax credit available for the first three years of a new retirement plan.


To be eligible, employers must:

  • Start a new plan
  • Not have an existing plan in the prior three years (including SIMPLE or SEP plans)
  • Have no more than 100 employees with at least $5,000 in wages in the prior year
  • Cover at least one non-highly compensated employee

Non-profit organizations are not eligible for the new tax credit.


As mentioned above, the tax credit is available every year for the first three years of a new plan. The maximum amount of credit per year is the lesser of:

  • 50% of eligible expenses, or
  • $250 per non-highly compensated employee (NHCE) covered by the plan

The amount cannot exceed $5,000. The table below explains further.  

Number of NHCEs Dollar Limit

1-2 $500

3-19 $250/NHCE

20+ $5,000

But wait…there’s more! New Auto Enrollment Tax Credit

Since one main goal of the SECURE Act is to incentivize retirement plan savings for Americans, it makes sense that an additional tax credit for Eligible Automatic Contribution Arrangements (EACAs) was created. An EACA is a plan feature designed to automatically enroll eligible employees at a uniform contribution rate while allowing employees to opt out. EACAs have proven to increase retirement savings substantially when implemented in a plan.


To be eligible for the automatic enrollment tax credit, employers must:

  • Have no more than 100 employees with at least $5,000 in wages in the prior year
  • Add an EACA to their plan that will be maintained throughout the tax year


This tax credit is $500 per year for each of the first three years a plan offers an EACA. It doesn’t matter what amount, if any, the employer has for expenses.

New Deadline for Adopting a New Plan

One of the most impactful provisions of the SECURE Act is the ability to retroactively adopt a new qualified plan, such as a profit sharing, defined benefit, or cash balance plan, after the close of the plan year.

What does this mean?

Employers now have until the due date of the business’s tax return, including extensions, to establish a profit shar­ing, defined benefit, or cash balance plan. The tax filing deadline varies based on the employer’s business entity type.

For example, an employer can sign the plan document and contribute to a new cash balance plan on March 15, 2021, adopting the plan retroactively as of January 1, 2020. Employers are also able to adopt a new profit sharing plan after the year-end, but can only add a 401(k) feature prospectively. This is a huge change that creates a lot of opportunities, and we cover this concept more extensively here.

New Deadline for Retroactively Adding a Safe Harbor Nonelective Contribution

In addition to the ability to adopt profit sharing, defined benefit, and cash balance plans retroactively, employers can now also add safe harbor nonelective contributions to plans later than they previously could.

Under the SECURE Act, plan sponsors can add a three percent safe harbor nonelective late in the year—up to 30 days prior to year-end (December 1). After that, they’re allowed to add a four percent  safe harbor nonelective contribution all the way until the end of the following plan year.  This allows for a plan to be safe harbor for a year they would have otherwise failed ADP testing, along with the potential to meet a top-heavy testing exemption (if no other employer contributions are made). To take advantage of this opportunity, the 401(k) deferral feature must have been in place for at least three months of the plan year.

Opportunities Abound!

These opportunities created by the SECURE Act offer more room for retirement savings growth among small business owners. These can be ideal for:

  • Plans that failed the ADP test
  • 401(k) plans that are top-heavy
  • High income professional groups with no retirement plan for the previous year
  • Employers considering a SEP, as profit sharing plans may provide a greater benefit to owners

Think that you or your clients might be good candidates for these opportunities? Contact us using the form below and we’ll reach out to you.  

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