If you’re self-employed or own a small business with 50 or fewer employees,

2023 is a great year for planning employee benefits.

And it won’t be difficult or costly to do.

Unless you already offer a retirement plan, you’ll be required to after passage of the Secure Act of 2022, a massive bill aimed at increasing people’s retirement savings and helping small businesses start a plan.

After the Secure Act and Secure Act 2.0, twenty states including Minnesota have passed laws requiring employers with five or more employees to offer retirement benefits and are in various stages of implementing them. (Nine state plans are active.)

Before lamenting yet another regulatory and costly burden on private business, this final regulation might be a big win for small business. Companies may comply with the law by either enrolling employees into a state sponsored (and regulated) program or offer a plan of their own. And the employer own-plan option just got a lot better.

Most companies with a plan offer a Simplified Employee Pension (SEP) or Savings Incentive Match Plan for Employees (Simple) plan. We had good reasons to love those plans; they are easy to establish and neither costly nor burdensome to administer.

But they also have little recruitment or retention benefit. I get the employer contribution, and no more. For employers, 401k plans were thought to be complex to establish and imposed a reporting burden. Plan designs would fail to ‘pass’

discrimination testing; and employers rightly worried about holding fiduciary responsibility for investment choices and performance.

Record keepers for 401k plans often offer the design and start-up for low fees, then raise them often. If you haven’t shopped your plan in three to five years, you’re likely overpaying.

Here’s the good news: the Government will pay for your plan start-up, and the administration of the plan for three years.

For employers with 50 or fewer employees and who provide a contribution match, the Government gives $1,000 per employee for the first five years. It’s like getting a turnkey, multi-million solution for a start-up price.

Good retirement plans are good for recruiting and important in competitive situations.

Beginning in 2025, 401k and 403b plans are required to automatically enroll eligible plan participants, starting at a minimum 3 percent contribution(increasing annually).

The small business start-up tax credits cover 100 percent of plan costs, up from 50 percent before the Secure Act (up to $5,000 annually for three years). The rule adds an additional $1,000 credit per employee for employer contributions.

The bottom line: if you have five or more employees, you’ll be offering a retirement plan; either your own or the Government’s plan.

Which would your employees prefer?