SECURE 2.0 introduced several tax credits designed to make starting a 401(k) plan more affordable for small businesses, helping employers reduce setup costs, offset employer contributions, and encourage employee participation.

For many small businesses, offering a retirement plan has historically felt too expensive or administratively complex. SECURE 2.0 significantly expanded incentives aimed at helping employers launch retirement plans while improving employee access to workplace retirement savings.

At Basic Capital, we believe modern retirement plans should feel more accessible, transparent, and scalable for growing businesses. Understanding how SECURE 2.0 tax credits work can help employers evaluate whether now is the right time to start or modernize a retirement plan.

Why SECURE 2.0 Matters for Small Businesses

Before SECURE 2.0, many small employers delayed offering retirement plans because of concerns around:

• Administrative costs

• Employer contribution expenses

• Compliance complexity

• Payroll coordination

• Limited internal HR resources

SECURE 2.0 expanded several retirement plan tax credits specifically aimed at reducing those barriers.

For qualifying businesses, these credits can help offset:

• Retirement plan startup expenses

• Employer contribution costs

• Automatic enrollment implementation

For many companies, the available tax savings can significantly reduce the cost of launching a new 401(k) plan during the first several years.

The Startup Retirement Plan Tax Credit

One of the largest incentives under SECURE 2.0 is the startup retirement plan tax credit.

Eligible employers may receive credits covering a substantial portion of retirement plan startup costs, including:

• Plan setup fees

• Administration costs

• Employee education expenses

For qualifying small businesses, the credit may cover up to 100% of eligible startup costs depending on company size.

Generally, businesses may qualify if they:

• Have 100 or fewer employees

• Have not recently sponsored another retirement plan

• Meet other IRS eligibility requirements

This credit is designed to help employers overcome the initial financial hurdle of launching a retirement plan for the first time.

Why It Matters

For many growing businesses, startup costs are one of the biggest reasons retirement plans get delayed.

At Basic Capital, we often see employers reevaluate retirement plan timing once they realize SECURE 2.0 can significantly reduce those upfront expenses.

The Employer Contribution Tax Credit

SECURE 2.0 also introduced additional tax incentives tied to employer contributions.

For eligible businesses, employers may receive tax credits based on contributions made on behalf of employees during the early years of a new retirement plan.

This can help offset:

• Employer matching contributions

• Non-elective contributions

• Safe harbor contributions

The contribution credit generally phases down over time, but it can still create meaningful savings during the first few years of plan adoption.

For employers considering whether they can afford matching contributions, this credit may materially change the financial equation.

Why It Matters

Employer contributions are often one of the most valuable retirement benefits employees receive, but they are also one of the biggest long-term cost considerations for employers.

SECURE 2.0 helps make:

• Employer matches

• Safe harbor contributions

• Participation incentives

more financially accessible for smaller businesses launching retirement plans.

The Auto-Enrollment Tax Credit

SECURE 2.0 also created a separate credit tied to automatic enrollment features.

Employers that add eligible auto-enrollment provisions to a new retirement plan may qualify for additional annual tax credits.

Automatic enrollment can help improve:

• Employee participation rates

• Retirement readiness

• Contribution consistency

• Long-term engagement with the plan

At the same time, it may help employers:

• Reduce nondiscrimination testing challenges

• Improve overall plan health

• Simplify participation growth strategies

The auto-enrollment credit was designed to encourage employers to build stronger retirement participation structures from the start.

Why It Matters

Many employees delay retirement participation simply because enrollment feels confusing or easy to postpone.

Automatic enrollment often improves participation significantly while helping employees begin saving earlier.

At Basic Capital, we believe modern retirement experiences should make participation easier and more accessible for employees from day one.

How These Credits Work Together

One of the biggest advantages of SECURE 2.0 is that multiple credits may apply simultaneously depending on the company’s structure and retirement plan design.

For example, a qualifying employer may potentially receive:

• Startup cost credits

• Employer contribution credits

• Auto-enrollment credits

during the same period.

For many small businesses, these combined incentives can dramatically lower the effective cost of launching a retirement plan.

That is why SECURE 2.0 has become a major catalyst for first-time retirement plan adoption among growing employers.

What Small Businesses Should Evaluate Before Starting a 401(k)

While the tax credits are valuable, employers should still evaluate:

• Long-term contribution affordability

• Administrative workflows

• Payroll integration

• Fiduciary responsibilities

• Employee participation goals

• Provider transparency

Retirement plans should remain sustainable operationally as the business grows.

At Basic Capital, we believe retirement infrastructure should help employers simplify administration while creating better employee retirement experiences over time.

Companies evaluating retirement plan modernization can also explore our For Employers resources to learn how modern retirement technology supports compliance, participation, and long-term retirement readiness.

Why Modern Retirement Infrastructure Matters

As retirement plans become more participant-focused, employees increasingly expect retirement experiences that feel:

• Transparent

• Easy to understand

• Personalized

• Connected to broader financial wellness goals

Modern retirement platforms can help employers:

• Streamline payroll integration

• Improve participant visibility

• Simplify administration

• Track compliance requirements

• Support employee engagement

At Basic Capital, we believe retirement plans should help employers reduce operational complexity while improving retirement outcomes for employees.

Looking Ahead

SECURE 2.0 created one of the most significant expansions of retirement plan incentives for small businesses in years.

For many employers, these tax credits may substantially reduce the barriers associated with launching a 401(k) plan for the first time.

At Basic Capital, we believe modern retirement plans should balance:

• Administrative simplicity

• Transparent pricing

• Employee engagement

• Long-term retirement readiness

• Scalable retirement infrastructure

As retirement expectations continue evolving, employers that adopt stronger and more accessible retirement benefits may be better positioned to improve recruiting, retention, and employee financial wellness over time.

Ready to explore retirement plan options for your business? Get started with Basic Capital to learn how our platform helps employers simplify retirement plan administration and improve participant outcomes.