Small Nonprofit Retirement Security Act of 2025
- Bill Number
- H.R. 4548
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-07-21: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-06-24T08:08:51Z
AI-Generated Summary
Purpose
The Small Nonprofit Retirement Security Act of 2025 aims to encourage small tax-exempt employers, such as nonprofits, to establish retirement plans for their employees by extending two existing tax credits to them. These credits were previously available only to for-profit businesses that pay income taxes. The bill modifies the Internal Revenue Code (IRC) to allow these nonprofits to claim the credits as reductions against their payroll taxes instead.
Key Provisions
- Extension of Startup Costs Credit (Section 45E Amendment): Adds a new subsection allowing tax-exempt eligible employers to claim a credit for costs related to starting a new pension plan (e.g., defined benefit or contribution plans). The credit amount is the lesser of the calculated credit or the employer's payroll taxes paid in the relevant year. It is treated as a credit under IRC Section 3111(g) against the employer's share of Social Security taxes.
- Extension of Auto-Enrollment Credit (Section 45T Amendment): Similarly adds a new subsection for a credit that rewards employers for automatically enrolling employees in retirement savings plans (like 401(k)s). The credit is limited to the lesser of the calculated amount or payroll taxes paid, and it applies as a payroll tax credit under Section 3111(g).
- Payroll Tax Credit Mechanism (New Section 3111(g)): Creates a specific credit against the employer's portion of Social Security payroll taxes (under IRC Section 3111(a)) for qualifying tax-exempt employers. The total credit in a year cannot exceed the employer's total payroll tax liability. A "special rule" (similar to one in child tax credit rules) ensures accurate calculation of payroll taxes paid.
- Definitions:
- Tax-exempt eligible employer: A small employer (as defined in existing IRC rules for these credits) that is a 501(c) organization exempt from federal income tax under IRC Section 501(a), such as charities, religious groups, or educational nonprofits.
- Payroll tax: Refers to the 6.2% employer-paid Social Security tax on employee wages.
- Effective Date: Applies to taxable years beginning after December 31, 2024.
- Funding Offset: Appropriates funds from the general Treasury to the Social Security Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. This covers any revenue loss from the credits, mimicking transfers that would occur if the employers were taxable, to protect Social Security funding.
Significant Changes to Existing Law
- Previously, the startup costs credit (IRC Section 45E) and auto-enrollment credit (IRC Section 45T) were only available to taxable small employers as offsets against income taxes. This bill changes that by converting the credits into offsets against payroll taxes for tax-exempt employers, making them accessible without requiring income tax liability.
- Introduces a new payroll tax credit provision (IRC Section 3111(g)) tailored for these scenarios, ensuring the credits do not create refunds beyond payroll taxes owed but still provide meaningful incentives.
- No changes to the underlying credit amounts or eligibility criteria for small employers (e.g., those with up to 100 employees), but expands access to the nonprofit sector.
Potential Impacts
- On Government Agencies: The IRS will need to administer the new payroll tax credits, potentially increasing processing for small nonprofits' quarterly filings. The Treasury and Social Security Administration will handle fund transfers to maintain trust fund solvency, avoiding any net loss to Social Security benefits.
- On Citizens/Employers: Small nonprofits may reduce their payroll tax burden (up to $5,000 per year per credit, based on existing rules), freeing up resources to offer better retirement benefits. Employees of these organizations could gain improved access to pension or savings plans, enhancing long-term financial security without direct cost to workers.
- On International Relations: No impacts, as the bill is domestic tax policy focused on U.S. employers and Social Security.
Main Stakeholders Affected
- Primary: Tax-exempt small employers (e.g., local charities, community organizations, small schools, or religious groups with fewer than 100 employees), who gain new financial incentives to adopt retirement plans.
- Secondary: Employees of these nonprofits, who benefit from expanded retirement options; the IRS (for enforcement and claims processing); and the Social Security Administration (for trust fund management).
- Broader: The nonprofit sector overall, which employs about 10% of the U.S. workforce and often struggles with offering competitive benefits compared to for-profits.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens incentives for retirement plan adoption under the IRC by addressing a gap for tax-exempt entities, ensuring equal access to federal encouragements for employee benefits. It maintains revenue neutrality for Social Security by mandating trust fund reimbursements, avoiding challenges under tax equity principles.
- Constitutional: No apparent issues; the bill aligns with Congress's taxing and spending powers under Article I, and it does not infringe on free speech, due process, or other rights.
- Political: Introduced with bipartisan sponsorship (Republicans and Democrats), signaling broad support for bolstering retirement security in the nonprofit sector amid concerns over America's aging population and savings gaps. It could set a precedent for adapting tax incentives to include exempt organizations without broader tax code overhauls.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (11)
Rep. Panetta, Jimmy [D-CA-19], Rep. Moore, Blake D. [R-UT-1], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Bynum, Janelle S. [D-OR-5], Rep. McBride, Sarah [D-DE-At Large], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Landsman, Greg [D-OH-1], Rep. Underwood, Lauren [D-IL-14], Rep. Steube, W. Gregory [R-FL-17], Rep. LaHood, Darin [R-IL-16], Rep. Carbajal, Salud O. [D-CA-24]
Recent Actions
- 2025-07-21: Referred to the House Committee on Ways and Means.
- 2025-07-21: Introduced in House
- 2025-07-21: Introduced in House
Bill Versions
- Small Nonprofit Retirement Security Act of 2025 — issued 2025-07-21 — PDF (6 pages)