Sponsors (3)
The bill lowers the cost for tax-exempt employers to start and auto-enroll retirement plans—expanding employee access—while shifting the payroll-tax cost onto the general fund and creating administrative burdens and eligibility limits for some employers.
Nonprofit and other tax-exempt employers (e.g., hospitals, health systems) can use the small-employer startup and auto-enrollment retirement credits against employer Social Security payroll tax up to their payroll-tax liability, lowering the cost to start and operate workplace retirement plans.
Employees of tax-exempt employers, including many middle-class families, are likely to gain increased access to workplace retirement savings because more employers can afford to adopt and auto-enroll workers in retirement plans.
Social Security Trust Fund balances are protected from the direct revenue impact of these credits because the bill requires Treasury transfers from the general fund to reimburse the Trust Funds for revenue reductions.
Federal taxpayers (the general fund) will cover lost payroll-tax receipts because the bill requires transfers to reimburse the Social Security Trust Funds, increasing federal outlays and adding budgetary cost.
Implementation will add administrative complexity and compliance burden for the IRS, SSA, and employers (new definitions, quarterly credit claims, annual aggregation), increasing operational costs and enforcement/administration workload.
The credit is limited by employer payroll-tax liability, so some tax-exempt employers with low payroll-tax exposure may be unable to claim the full credit, reducing the benefit for smaller or low-payroll organizations.
Based on analysis of 2 sections of legislative text.
Allows tax-exempt employers (for example, charities, schools, and other nonprofits) to apply two small-employer retirement tax credits — the pension plan startup credit and the auto-enrollment credit — against their employer Social Security payroll tax liability instead of needing income tax liability to use the credits. The credits are limited to the amount of payroll tax paid in the year and only up to the normal credit amounts. The law directs transfers from the Treasury general fund to the Social Security trust funds equal to the revenue reductions caused by this change so that those trust funds are made whole. The change is implemented by adding new Internal Revenue Code rules that treat those retirement credits as credits under the employer Social Security payroll tax and by defining terms and annual limits; it applies to taxable years beginning after December 31, 2024.
Introduced July 21, 2025 by James Lankford · Last progress July 21, 2025