Sponsors (3)
The bill makes it easier and cheaper for tax‑exempt small employers to offer or auto‑enroll workers in retirement plans by letting credits offset employer payroll taxes, while shifting the fiscal cost to the general fund and adding administrative complexity that may disadvantage the tiniest employers.
Nonprofits and other tax-exempt small employers (and the workers they employ) can apply startup and auto‑enrollment retirement plan tax credits against the employer share of Social Security payroll tax, lowering employer payroll tax liability and making it cheaper to adopt or auto‑enroll employees in workplace retirement plans.
The bill directs Treasury general‑fund transfers to restore amounts lost to the OASI and DI trust funds, preserving the receipts for Social Security and Disability and helping protect benefits for retirees and disabled workers.
Reimbursing Social Security trust funds from the general fund increases federal outlays and could heighten deficit pressure or crowd out other federal spending priorities.
Implementation requires IRS/Treasury guidance and quarterly payroll coordination, creating additional administrative complexity and compliance burdens for small tax‑exempt employers and extra workload for federal tax administrators.
Because the credit is limited to the employer payroll tax paid, very small employers with low payrolls may receive less than the full credit value, reducing the benefit for the smallest organizations.
Based on analysis of 2 sections of legislative text.
Allows eligible tax-exempt small employers to use startup and auto-enrollment retirement credits against employer Social Security payroll tax, with trust-fund offsets from the general fund.
Official title: 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 James Lankford · Last progress July 21, 2025
Allows small tax-exempt employers (qualified 501(c) organizations) to use two existing small-employer retirement plan tax credits — the startup credit and the auto-enrollment credit — as refundable payroll-tax credits against the employer-side Social Security (OASDI) payroll tax, up to the payroll tax actually paid for the year. The bill requires Treasury transfers from the general fund to the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds to offset the resulting reduction in payroll-tax receipts and applies to taxable years beginning after December 31, 2024. This change converts nonrefundable/credit-only benefits into a payroll-tax offset for eligible nonprofits, easing the upfront cost of starting or auto-enrolling employees in retirement plans and preserving Social Security trust fund financing through administratively timed transfers from the general fund.