Sponsors (12)
Allows tax-exempt employers to claim two small-employer retirement credits as payroll (FICA) tax credits and reimburses Social Security trust funds for any revenue loss.
Official title: To amend the Internal Revenue Code of 1986 to make the credit for small employer pension plan startup costs and the retirement auto-enrollment credit available to tax-exempt eligible small employers.
Introduced July 21, 2025 by Vernon G. Buchanan · Last progress July 21, 2025
The bill extends refundable payroll tax credits to tax‑exempt and small employers to increase retirement plan adoption while protecting Social Security trust funds, but it limits benefits for the smallest employers, raises general‑fund costs, and adds administrative complexity.
Employees of tax‑exempt and small employers (e.g., nonprofits and small businesses) are more likely to get access to workplace retirement plans because the bill makes startup and auto‑enrollment tax incentives usable by organizations that previously couldn't claim the income‑tax credits, encouraging more employers to offer plans.
Tax‑exempt employers (like 501(c) nonprofits) can reduce their payroll tax liability because they can claim a refundable small‑employer retirement credit against employer payroll taxes.
Social Security trust funds (OASI and DI) are protected from direct revenue loss because the bill appropriates amounts equal to the revenue reductions, avoiding a direct depletion of those trust funds.
Very small or newly formed tax‑exempt employers may receive a smaller benefit because the refundable credit is capped at the amount of payroll tax they actually pay, limiting the help these organizations can get to start retirement plans.
Protecting Social Security trust funds via appropriations shifts costs to the federal government’s general fund, which could increase general‑fund outlays or create budgetary pressure elsewhere.
Employers and the IRS/Treasury face added administrative complexity because the bill creates a new refundable payroll credit with quarterly repayment rules and new reporting/limit mechanics.
Based on analysis of 2 sections of legislative text.
Makes two existing small-employer retirement tax credits (the start-up plan credit and the automatic-enrollment credit) available to tax-exempt employers by allowing those credits to offset the employer share of payroll (FICA) tax; limits the usable credit to the payroll tax actually paid in the year and applies an annual aggregate limitation. The bill also directs Treasury to transfer amounts to the Social Security OASI and DI Trust Funds equal to any revenue reductions so the trust funds are reimbursed, and the changes take effect for taxable years beginning after December 31, 2024.