Free Guide for Business Owners
82% of Business Owners Don't Know the Government Will Pay Them to Start a 401(k)
Free Guide for Business Owners
If you're a business owner doing $1M–$20M in revenue, you've said this — or something close to it:
“I know I'm paying too much in taxes. I just don't know how to fix it.”
Maybe in April, after your accountant handed you the number. Maybe in December, when you realized another year went by without a real tax strategy. Either way, the money you overpaid doesn't come back.
82% of small business owners are completely unaware of the tax credits available to them for starting a retirement plan. That's not a rounding error. That's an industry-wide failure of information. — NAPA / ShareBuilder 2024 Survey
Here's what's happening right now: the SECURE Act 2.0 — signed into law in late 2022 — created three tax credits specifically designed to help small businesses start 401(k) plans. Not deductions. Dollar-for-dollar tax credits (subject to your actual tax liability and eligibility). Consult your tax advisor for how they apply to your situation.
Your competitors already know about this. The ones your best employees keep getting recruited by? They're claiming these credits. They're offering 401(k) plans that cost them nothing out of pocket. And they're using those plans to lock in the people you spent years training.
Meanwhile, 48% of small business owners think they can't afford a retirement plan. They can. The government is picking up the tab — but only if you start the plan. Every year without one is a year of credits you can never reclaim.
The three-year clock is ticking. These startup credits are only available for the first three years of your plan. They don't apply retroactively. If you started a plan in 2024, you're already capturing them. If you haven't started one yet, 2026 is still on the table — but every year you wait is a year of credits permanently lost.
This guide gives you the exact numbers — no jargon, no fine print, no sales pitch. Five minutes. That's all it takes to see what you've been missing.
The SECURE Act 2.0 created three distinct tax credits for small businesses that start a new retirement plan. Here's what each one is worth — in plain English.
Covers 100% of plan startup costs for businesses with 50 or fewer employees. The credit equals the greater of $500 or $250 per eligible employee, capped at $5,000. Covers administration, setup, and employee education.
A flat $500 annual credit for including automatic enrollment in the plan design. Three-year window. Most modern plans include auto-enrollment by default — and new plans started after Dec 2022 are required to.
A dollar-for-dollar credit on employer contributions, up to $1,000 per employee earning under $100K. Available at 100% for years 1–2, then 75% (yr 3), 50% (yr 4), 25% (yr 5). This is where the big numbers come from.
Credits vs. deductions: A $5,000 tax credit can potentially reduce your tax bill by up to $5,000. A $5,000 deduction typically saves you a portion of that depending on your bracket. Actual credit realized depends on your tax liability — consult your tax advisor.
| Credit Type | Annual Amount | Duration | Total |
|---|---|---|---|
| Startup Cost Credit | Up to $5,000 | 3 years | $15,000 |
| Auto-Enrollment Credit | $500 | 3 years | $1,500 |
| Total (before employer contribution credits) | $16,500 | ||
Who qualifies: Businesses with 100 or fewer employees (full credit for 50 or fewer). No existing 401(k) or comparable plan during the prior three tax years. At least one non-highly-compensated employee eligible to participate. — IRS Form 8881
The startup and auto-enrollment credits are the same regardless of company size (up to $16,500 over three years). The employer contribution credit is where headcount changes the equation. Here's the math for three company sizes.
Assumes max employer contribution credit of $1,000 per eligible employee per year, with SECURE 2.0 phase-down schedule. Employees earn under $100K.
| Credit | 10 Employees | 25 Employees | 50 Employees |
|---|---|---|---|
| Startup Cost (3 yrs) | $7,500 | $15,000 | $15,000 |
| Auto-Enrollment (3 yrs) | $1,500 | $1,500 | $1,500 |
| Employer Contrib. — Yr 1 (100%) | $10,000 | $25,000 | $50,000 |
| Employer Contrib. — Yr 2 (100%) | $10,000 | $25,000 | $50,000 |
| Employer Contrib. — Yr 3 (75%) | $7,500 | $18,750 | $37,500 |
| Employer Contrib. — Yr 4 (50%) | $5,000 | $12,500 | $25,000 |
| Employer Contrib. — Yr 5 (25%) | $2,500 | $6,250 | $12,500 |
| Total Credits (5 Years) | $44,000 | $104,000 | $191,500 |
The bottom line: For eligible employers with under 50 employees, the tax credits can potentially cover up to 100% of plan startup costs. In some cases the plan may effectively cost very little in year one — and the employer contribution credits can continue for up to five years. A 25-person company making modest contributions could potentially see over $100,000 in total tax credits at full eligibility. Actual amounts depend on your specific situation — consult your tax advisor.
Important: Employer matching is optional. You don't have to contribute a dime to employee accounts. But if you do, the government gives you a credit for it — up to $1,000 per employee. It's one of the only times the IRS pays you to do something good for your team.
The tax credits are the obvious financial win. But there's a second reason the smartest business owners are setting up 401(k) plans right now: they're losing people without them.
Think about what those numbers mean for a company your size. Your operations manager makes $85,000. She leaves because a competitor offers a 401(k) with matching. Replacing her costs you $42,500–$170,000 in recruiting, training, and lost productivity — and the role sits empty for four months while your business runs without her.
Now compare that to a 401(k) plan that the government is subsidizing.
“A 401(k) isn't just an employee benefit. It's a talent strategy. The businesses that treat it that way are the ones keeping their teams intact.”
The real ROI of a 401(k): Retaining even one key employee who would have left pays for the plan many times over — especially when the government is subsidizing the cost through tax credits for the first five years.
If you've looked into starting a 401(k), you've probably visited a few provider websites. Guideline. Fidelity. Betterment. ADP. They all say the same thing: “Easy setup. Low fees. Attract and retain talent.”
Here's what none of them say — because none of them are built to.
“Here's what I would do if I were you” is something a software platform can never say. That's the difference between a tool and an advisor.
I'm Austin Harley — a financial advisor with Roadstead Capital Partners in Charleston. My practice focuses on three connected areas: employer 401(k) plans for growing South Carolina companies, retirement planning for individuals and couples approaching retirement, and personal planning for business owners.
For employer plans, I work with plan sponsors, HR teams, and committees on fiduciary process, investment monitoring, provider coordination, payroll integration, and employee education.
The plans and people I serve are all built through Roadstead. This guide is educational — not a recommendation for your specific situation.
Affiliated with Roadstead Capital Partners
250 Mathis Ferry Road, Suite 200 | Mount Pleasant, SC 29464
Every year without a plan is a year of tax credits you can't get back. Let's run the numbers for your specific situation — it takes 30 minutes, not 30 days.
Scan to book a 30-minute call
Or visit the link below
Book a 30-Minute CallNo obligation. No sales pitch. Just the math for your business.