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Tax credit for a small employer’s start-up expenses for using a multiple-employer plan?


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Internal Revenue Code § 45E provides a tax credit for a portion of a small employer’s (up to 100 employees) qualifying expenses to establish or administer a new retirement plan.

About what’s new:  An employer cannot qualify for this credit if, during the three-taxable-year period that immediately precedes the first taxable year for which the credit otherwise could be allowed, the employer or any member of any controlled group that includes the employer (or any predecessor of either) established or maintained a qualified employer plan for which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan for which the credit otherwise could be allowed.

How does this work with a multiple-employer plan—whether an association retirement plan, some other “closed” MEP, an “open” MEP, or a pooled-employer plan?

For this credit, does it matter that the plan is not a startup?

Or is it enough that the employer’s participation under the plan is the first time the employer provided any retirement plan for its employees?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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