Secure 2.0 tax credits for safe harbor 401(K)

Hi. We currently offer simple IRA to employees. Offered to 5 employees in 2022, all (30) in 2023. However, only 3 took it - most didn’t even realize we have this plan.

we are looking to terminate simple ira and start safe harbor 401k with profit sharing. We will be offering to all employees. Would we be eligible to receive secure 2.0 act tax credits?

can we say these plans are “not substantially same” and hence claim tax credit?

thanks 

Here’s the tax law point your query seems to ask about:

“Such term [an “eligible employer”] shall not include an employer if, during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allowable for a qualified employer plan of the employer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan.”

Internal Revenue Code of 1986 (26 U.S.C.) § 45E(c)(2) (emphasis added).

I.R.C. § 45E(d)(2)’s definition for an “eligible employer plan” refers to “a qualified employer plan within the meaning of section 4972(d).”

I.R.C. § 4972(d)(1)(A)(iv) includes among four kinds of qualified employer plans “any simple retirement account (within the meaning of section 408(p)).”

There is no Federal tax law rule or regulation that interprets Internal Revenue Code § 45E.

Ask your tax lawyer or certified public accountant about what fits or doesn’t for your circumstances.

Understand that many retirement-plan practitioners (deliberately) don’t provide advice about the § 45E tax credit.

This is not advice to anyone.