Auto Enroll 401(k) Tax credit

[WealthWise]

The secure 2.0 act created a tax credit for 401(k) plans that are electing to auto enroll the employees in the plan. Unlike the start-up credits that requires one non-owner employee to be on this plan the Auto-Enrollment credit does not have this requirement. Therefore, if you (or you and your spouse) are the only employee of a company you can do it with a solo 401(k) plan.

Things to be aware of:

This credit is non-refundable tax credit.

The amount of the credit is $500 a year up to three years to a total of $1,500

Their are very few brokerage companies that are offering a solo 401(k) with the auto-enrollment option, the cheapest I found was Betterment which have no setup fee, just a platform fee of $100 (waived for 2025) see the following link for their solo 401(k) [Content removed by moderator].

It needs to be setup before the end of the year and you qualify for this credit even you don't contribute to the plan.

[IRonMaN]

I always find it very interesting when the first post a person makes here is to refer someone to a third party and then provide a handy link for them to click on.  Of course, I learned long ago never to click on something that is provided by someone that I don't know or trust.

[WealthWise]

Hi IronMaN,

Thanks for your feedback. I put here the link for anyone's convenience, as I felt very exhausted by advising my client and then figured out that most brokerage companies do not have this option for a solo 401(k), and from the few that do have this option, their fees are eating up most of the credit, and in the first year, it is even more than the credit. Therefore, I thought, Let's share right away a firm with a very low fee to be able to take the most advantage from this credit.