Small Employer Retirement Plan Startup Credit

The SECURE Act 2.0 lets small businesses recover the cost of starting a retirement plan — covering up to 100% of startup costs, a bonus for automatic enrollment, and a credit for the contributions you make to employees. Most plans claim it over their first three years.

Three credits in one

Eligible employers can stack all three for the same plan year.

Startup cost credit

100% of plan setup, administration, and employee education costs if you have 1–50 employees (50% for 51–100). Up to $5,000 per year for 3 years.

Auto-enrollment credit

A flat $500 per year for 3 years when your plan includes an eligible automatic-enrollment feature — on top of the startup credit.

Employer contribution credit

Businesses with 50 or fewer employees can claim a credit of up to $1,000 per employee for contributions made to their plans, phasing down over five years.

Up to $5,500 / year

Startup cost credit (up to $5,000) plus the auto-enrollment credit ($500), claimable for three years — before adding the per-employee contribution credit.

Who qualifies

You likely qualify if…

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You had 100 or fewer employees who earned at least $5,000 in the prior year.
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You started a new qualified plan (401(k), SIMPLE IRA, SEP IRA, etc.) — the credit covers the first three years.
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At least one participant is a non-highly-compensated employee.

Good to know

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The startup credit can't exceed your actual eligible plan costs for the year.
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Defined-benefit plans and certain controlled-group situations have different rules.

How to claim it

The credit is claimed on IRS Form 8881 (Credit for Small Employer Pension Plan Startup Costs) and flows through to your business return as part of the general business credit. Mainstreet confirms eligibility, calculates each component, and packages the workpapers for your CPA.

Not sure how much you'd get? Run the 2-minute estimate and we'll email you a copy.

Educational information only and not tax, legal, or accounting advice. Retirement plan credit rules (IRC §45E, §45T, Form 8881) are fact-specific; consult a qualified professional before acting. Figures shown are illustrative.