Congress quietly doubles tax credit for tiny employers offering retirement plans
S. 1840 — Retirement Investment in Small Employers Act · Filed by Maggie Hassan (D-NH) · 1 cosponsor · Introduced May 21, 2025 · Referred to committee
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What it does
This bill increases the federal tax credit for small employers that set up retirement plans. Specifically, it doubles the credit from 50% to 100% of startup costs for 'microemployers'—businesses with 10 or fewer employees—and raises the annual credit cap from $500 to $2,500 per year. The credit applies only if the employer's retirement plan accepts matching contributions under a specific IRS mechanism (section 6433).
Why we flagged it
The bill is a targeted tax credit expansion designed to lower the cost of retirement plan administration for very small employers, with the stated goal of increasing retirement savings access for workers at microenterprises.
What the text implies
- The credit is capped at $2,500/year per employer, meaning a microemployer can recover at most $2,500 in federal tax liability annually—a modest incentive that may not overcome other barriers to plan adoption (administrative complexity, fiduciary liability, ongoing compliance costs).
- The credit requires the plan to accept matching contributions under IRC §6433, a specific mechanism that may impose additional administrative requirements or limit plan design flexibility, potentially offsetting the credit's value.
The full analysis lists 4 implications of this text.
Who stands to gain
microemployers (businesses with ≤10 employees); retirement plan service providers and administrators (increased demand for plan setup and administra