Sponsors (3)
The bill makes it substantially easier and cheaper for tax-exempt employers to offer retirement plans—expanding employee retirement access—while shifting near-term federal revenue costs to the Treasury and adding administrative complexity that may reduce benefits for the smallest nonprofits.
Nonprofit and other tax-exempt employers can immediately apply retirement-plan tax credits against payroll tax liabilities, lowering near-term payroll tax payments up to the credit amount.
Employees of tax-exempt organizations (including many middle-class families) gain greater access to workplace retirement plans because it becomes easier and more valuable for those employers to start plans or adopt automatic enrollment.
Seniors and future beneficiaries are protected because the bill requires transfers to the OASI and DI Trust Funds equal to Treasury revenue reductions, offsetting the immediate effect on Social Security funding.
The general Treasury will absorb the immediate revenue loss from converting tax credits to payroll offsets, which could increase federal borrowing or crowd out other federal spending.
Implementing the change requires IRS and SSA coordination and new administrative rules, raising compliance complexity for employers and increasing administrative costs for government and taxpayers.
Nonprofit employers with little or no payroll tax liability may not be able to use the full credit if their payroll tax paid is smaller than the credit amount, limiting the benefit for the smallest organizations.
Based on analysis of 2 sections of legislative text.
Allows 501(c) tax-exempt employers to use two retirement-related credits against payroll taxes and requires transfers to Social Security trust funds to offset revenue losses.
Introduced July 21, 2025 by James Lankford · Last progress July 21, 2025
Allows tax-exempt employers (organizations exempt under section 501(a) and described in 501(c)) to use two retirement-related tax credits — the small employer pension plan startup costs credit and the retirement auto-enrollment credit — against payroll tax liability instead of only as income tax credits. The credits are limited to the lesser of the credit amount or the employer’s payroll tax paid for the year. The change takes effect for taxable years beginning after December 31, 2024, and the bill directs transfers from the general fund to the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds to offset any reductions in Treasury receipts caused by this change.