Retirement Plan Changes – Credits, Eligibility & More From The SECURE Act

Paul Miloe, CRPS®

Paul Secure Act

The passage of the SECURE ACT in late December has created several changes to employer-sponsored retirement plans. For employers with under 100 employees, the plan start-up credit has been increased to the greater of $500, or the lesser of $250 x each eligible Non-Highly Compensated Employee (NHCE) or $5000. For example, an employer with 15 eligible NHCEs could get a credit of $3,750 ($250 x 15). This is a valuable benefit for those considering adopting a new plan. These changes are now in effect.

The timing for employers to adopt a new 401(k) plan has also been changed. Prior to 12/31/19, plans had to be adopted by 12/31 for that tax year. Beginning in 2020, employers can adopt a plan by their tax filing deadline (inclusive of extensions) for a given tax year.

Another change involves plan eligibility. Traditionally, plans could set a 1yr/1000 hour requirement for employees age 21 and over. A new provision has been added that requires employers to offer the plan to employees who have worked at least 500 hours in any 3 consecutive years. These employees will then be subject to a subset of provisions that each employer may adopt covering items like whether these employees will be part of plan testing, receive certain employer contributions, etc. Each year in which the employee works over 500 hours will count towards vesting. For employers with part-time employees, this a major change and one that will need to be closely monitored to ensure proper notification is given to all those who are eligible. These changes will become effective after 12/31/20.

For employers utilizing the non-elective Safe Harbor contribution, the annual notice requirement has been eliminated. An initial notice is still required when the employee becomes eligible. Likewise, employers can now chose to amend their 401(k) plan to use a non-elective safe harbor (3% to all eligible) so long as the change is made 30 days prior to year-end, or on or after the 30th day before year-end so long as the contribution will be at least 4%. These changes are effective starting in 2020.

Finally, for plans required to file IRS Form 5500, the penalties for late filing have been substantially increased. In prior years, the penalty was $25/day up to a maximum of $15,000. The new penalty increases ten-fold to $250/day up to a maximum of $150,000!!! If your plan is required to file a 5500, use extreme diligence to ensure the 5500 is filed timely. 5500s are typically required to be filed by the last day of the 7th month following the plan year-end (July 31st for calendar year plans). To know your plan’s deadline, check with your Plan Administrator. Be careful.

Paul Miloe


Paul Miloe has been actively working as a financial advisor with Albitz/Miloe & Associates, Inc. since 1996. He graduated from University of California, Santa Barbara in 1994 with a Bachelor of Science degree. Paul is a Chartered Retirement Plans SpecialistSM. His focus centers on personal and retirement planning, life insurance, annuities, college savings plans, and senior issues, including long-term care insurance. In addition to his role as CCO of our firm, Paul is also a Branch Manager for Cetera Advisor Networks, LLC (member FINRA/SIPC). Paul, and his wife, Mary, are lifelong residents of the South Bay, and along with their two children, and are active in their community via sports, school, and community service.

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This article provides a general overview of the subjects covered. It is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with your legal or tax advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.