Tax credit for tiny-business retirement plans would double under S 1840

What does this do?

S 1840 increases the existing small-business retirement plan startup tax credit for businesses with 10 or fewer employees, raising coverage from 50% to 100% of startup costs and lifting the annual maximum from $500 to $2,500. To qualify for the larger credit, the retirement plan must accept the Saver's Match, a federal program that provides matching contributions for lower-income workers. The changes would take effect starting with the 2025 tax year.

Who does it affect?

The bill directly affects owners of businesses with 10 or fewer employees, such as small shops or service companies. Employees at those businesses are also affected, as the incentive is intended to expand their access to workplace retirement savings plans.

Why does it matter?

If enacted, small business owners would face a stronger financial incentive to establish retirement plans, which could result in more workers at very small companies gaining access to a workplace savings option. The bill also links employer-side and employee-side retirement saving incentives by tying the expanded credit to the Saver's Match program.

What does it cost, and who pays?

• Credit rises from $500 to $2,500/yr
• Covers 100% of startup costs
• Federal revenue reduced accordingly

Where does it stand?