Sponsors (3)
The bill makes it cheaper for tax-exempt and small employers to start or auto-enroll workers in retirement plans—likely increasing coverage—while relying on general-fund reimbursements that raise federal outlays and adding compliance complexity for the smallest employers.
Tax-exempt small employers (501(c) organizations) and small businesses can apply startup and auto-enrollment retirement plan tax credits against the employer share of Social Security payroll tax, lowering the net cost of adopting or auto-enrolling employees in workplace retirement plans and making retirement coverage more likely for middle-class employees.
The bill directs general-fund transfers to replace Treasury receipts lost by the trust funds, protecting Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) receipts so beneficiaries and retirees are not directly reduced by the payroll-tax offsets.
Replacing lost Treasury receipts with general-fund transfers increases federal outlays and could add pressure to the deficit or crowd out other federal spending priorities.
Very small employers with low payroll tax liability may be unable to use the full value of the credit because the offset is limited to the employer payroll tax paid, reducing the benefit for the smallest nonprofits and micro-employers.
Implementing the payroll-offset mechanism will require IRS/Treasury guidance and quarterly payroll coordination, adding compliance complexity for small tax-exempt employers and administrative burden for federal agencies.
Based on analysis of 2 sections of legislative text.
Permits tax-exempt small employers to apply existing small-employer retirement credits against the employer Social Security payroll tax, subject to payroll-tax limits and trust-fund transfer offsets.
Introduced July 21, 2025 by James Lankford · Last progress July 21, 2025
Allows tax-exempt small employers to use two existing small-employer retirement plan tax incentives as credits against the employer-side Social Security payroll tax rather than only against income tax. Limits the credits to the amount of payroll tax paid in the year, requires transfers from the general fund to Social Security trust funds to offset lost revenue, and applies to tax years beginning after December 31, 2024. Includes technical changes to the Internal Revenue Code to treat the startup credit and the automatic-enrollment credit as payroll-tax credits for qualifying tax-exempt employers and sets rules for measuring the payroll tax limit and annual aggregate claiming.