The SECURE 2.0 Act represents a significant shift in retirement plan legislation, impacting various sectors, including the construction industry. Understanding these changes is crucial for those who deal with construction finance, particularly for those working with prevailing wage contractors. In this article, we’ll delve into the implications of SECURE 2.0 for Prevailing wage contractors and the benefits of this new legislation.

What is SECURE 2.0?

The SECURE 2.0 Act, short for Setting Every Community Up for Retirement Enhancement Act 2.0, builds on the original SECURE Act passed in 2019. The goal of SECURE 2.0 is to further improve retirement security for American workers by increasing access to retirement plans, boosting retirement savings, and simplifying plan administration. Key provisions include:

• Increased automatic enrollment.
• Higher catch-up contribution limits.
• Incentives for small businesses to establish retirement plans.

Prevailing Wage Contractors: An Overview

Prevailing wage laws mandate that contractors working on federally funded or assisted construction projects pay their laborers and mechanics no less than the locally prevailing wages and benefits paid on similar projects, and in some states, prevailing wage laws also extend to state and locally-funded projects. These laws ensure fair compensation and help maintain a level playing field in the industry.

The Impact of SECURE 2.0 on Prevailing Wage Contractors

Enhanced Retirement Plan Access

One crucial aspect of SECURE 2.0 is to expand access to retirement plans. Expanded access presents an excellent opportunity for prevailing wage contractors to offer attractive retirement benefits, making it easier to attract and retain employees. The new legislation aims to simplify the process of establishing and managing retirement plans by reducing administrative burdens and providing increased tax incentives.

Increased Contribution Limits

SECURE 2.0 introduces higher catch-up contribution limits for workers aged 60 and above. This change can benefit older employees in the construction industry who are looking to bolster their retirement savings as they approach retirement age. Contractors will need to update their benefits packages to align with these new limits, ensuring compliance and maximizing the benefits for their employees.

Tax Incentives and Credits

The Act provides enhanced tax credits for small businesses that establish new retirement plans or enhance existing ones. For prevailing wage contractors, these incentives can offset the costs associated with upgrading their benefits packages to comply with prevailing wage requirements. Fringe contributions to a retirement plan are also eligible for up to $1,000/employee in tax credits for new plans. CPAs and financial advisors should advise their clients on effectively leveraging these credits.

Automatic Enrollment and Escalation

SECURE 2.0 requires new retirement plans to enroll and escalate employee contributions automatically. For contractors, this means updating their payroll systems and employee onboarding processes. Automatic enrollment helps increase employee participation rates, ensuring that more workers benefit from retirement savings plans.

Compliance and Reporting

Prevailing wage contractors must stay vigilant about compliance with both prevailing wage laws and the new SECURE 2.0 provisions. This can be complex, requiring meticulous record-keeping and reporting. CPAs and financial advisors should emphasize the importance of maintaining accurate records and staying updated with the latest regulatory changes.

SECURE 2.0 Act brings significant changes that can positively impact prevailing wage contractors and their employees. By understanding and adapting to these changes, contractors can elevate their benefits packages, ensure compliance, and ultimately provide better financial security for their workforce. CPAs and financial advisors specializing in construction finance play an essential role in guiding their clients through this transition, unlocking new opportunities, and expertly navigating the complexities of the new legislation, positioning themselves as indispensable partners in this exciting phase of development.

If you have questions about prevailing wage or prevailing wage benefits, contact us today and let us show you how to maximize your fringe dollars to help your employees and even save your company money!

For more information regarding your retirement plan or SECURE 2.0 please contact your financial advisor.