Bank of America Corporation, which launched a 401(k) plan for small businesses in 2012, also did so because many of its more than three million small business customers wanted a 401(k) plan as well. said Managing Director Erin Donnelly. Bank of America’s Retirement and Personal Wealth Solutions Group in Pennington, New Jersey uses PAi as its recordkeeper and Morningstar Investment Management LLC as his 3 (38) investment advisor.
Merrill Small Business 401(k) helps Bank of America expand its suite of small business retirement plan options, including SIMPLE (Savings Incentive Match Plan for Employees) plans and SEP (Simplified Employee Pension) individual retirement accounts I was.
Donnelly declined to disclose the number or wealth of small business employers in the Merrill Small Business 401(k) plan, saying the bank does not publish those figures.
Given strong customer demand and the enhanced tax credits enacted by the December 2019 passage of the Establishment of All Communities to Strengthen Retirees (SECURE) Act, bank executives said the 401(k ) bullish on plan offering growth. They are also optimistic about additional incentives being considered as part of a trio of bills commonly referred to as SECURE 2.0.
Effective December 2019, the current tax credit is available for employers with up to 100 employees for three years and is capped at $5,000 annually, representing 50% of retirement plan costs. This is ten times his previous cap of $500.
Other incentives are in preparation. For example, under the provisions of his 2022 strong retirement law passed by the House of Representatives in March, tax credits will be more favorable for employers with 50 or fewer employees. According to industry experts. The law covers 100% of the retirement plan start-up costs, with an annual cap of $5,000 for him. Plus, receive additional credits up to $1,000 over five years for contributions made on behalf of each employee. The proposed credit offsets him 100% of employer contributions for the first two years, then 75% in year 3, 50% in year 4, and 50% in year 5. gradually decreases to 25%.
For example, an employer that contributes $1,000 to each of its 20 employees will receive credits of $20,000 in the first two years, $15,000 in the third year, $10,000 in the fourth year, and $5,000 in the fifth year. increase. .
The expected new credit, coupled with strong demand, has led bank executives to set ambitious growth targets. Huntington’s Zugaro plans to add 100 to 200 plans a year over the next five years. JP Morgan’s Cote, meanwhile, aims to become a leading 401(k) provider in the sub-$5 million small plan market over the next decade.
Management is optimistic about growth prospects despite competition from record holders, robo 401(k) providers and even pooled employer plans.
“Depending on plan size and other factors, a pooled employer plan configuration may result in lower fees, but not in all cases,” Bank of America’s Donnelly said. I’m here.
The bank’s management believes its strong embedded base of small business customers gives it an important strategic advantage over its non-bank rivals.
JP Morgan’s Court said there is “a lot of room for solutions.” “Small plan marketplaces have historically been underserved, so I think the emergence of new competitors is healthy.”
