It is a startup cost for setting up retirement plans for employees. You qualify to claim this credit if:
- You had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year;
- You had at least one plan participant who was a non-highly compensated employee (NHCE); and
- In the three tax years before the first year you’re eligible for the credit, your employees weren’t substantially the same employees who received contributions or accrued benefits in another plan sponsored by you, a member of a controlled group that includes you, or a predecessor of either.
if you are a sole proprietor with no employees and prepare a Schedule c return ,you are not eligible for this credit. Please refer to this IRS link for more details. This is the same credit that you described as a automatic participation feature tax credit and is about startup costs.
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