What is a Pension plan startup credit?
The pension plan startup credit is a federal tax incentive allowing eligible small businesses with 100 or fewer employees to claim up to 50% of qualified startup costs for establishing new retirement plans, with a maximum credit of $5,000 per year for three consecutive years. This credit applies to Traditional 401k plans, SIMPLE arrangements, and SEP programs. Qualifying expenses include professional fees for plan design, administrative setup costs, employee education materials, and compliance services. The credit helps offset the financial burden of establishing a plan, encouraging small businesses to offer retirement benefits. An additional $500 annual credit is available for plans with automatic enrollment features.
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