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Small nonprofits might get a boost to launch retirement plans if bills introduced in both houses of Congress pass, are merged and are then signed into law.
The “Small Nonprofit Retirement Security Act” (H.R. 4548 | S. 2365) was introduced in the House of Representative by Rep. Vern Buchanan (Fla. 13) who is vice chairman of the House Ways and Means Committee. Sens. James Lankford (R-Okla.) and Catherine Cortez Masto (D-Nev.) introduced it in the U.S. Senate.
The House version allows nonprofits the Employer Contribution Credit, which provides a tax credit up to $1,000 per employee for employer retirement contributions (excluding deferrals) to workers earning under $100,000 annually, with the full credit available for the first year and phasing down over five years.
Under current law, tax-exempt organizations are ineligible for the SECURE Act’s small business retirement plan start-up credit since they do not pay federal income taxes. This creates a barrier for many nonprofits which contribute an estimated $65 billion annually in payroll taxes. The Small Nonprofit Retirement Security Act would allow nonprofits to apply these tax credits against their payroll tax liability, giving them access to the same retirement incentives already available to for-profit organizations.
The House version provides up to $5,000 per year in tax credits to help nonprofits launch retirement plans, plus an additional $500 annually for those that adopt automatic enrollment. To ensure nonprofits can fully benefit, the credits can be applied directly to their payroll tax liability.
“Oklahoma’s nonprofits are vital to our communities, providing essential services every day. Many small nonprofits struggle to offer retirement plans due to cost and limited access,” Lankford said via a statement. “This legislation extends critical startup and auto-enrollment tax credits to nonprofits the same as for-profit businesses, allowing them to attract and retain talented employees. By supporting nonprofits in this way, we strengthen our communities.”
The legislation is supported by the American Retirement Association. “This legislation will ensure that nonprofits have access to the same tax incentives for starting up a retirement plan that were provided to for-profit small businesses in SECURE 2.0,” Brian Graff, CEO of the American Retirement Association said via a statement. “The ARA applauds Senators Lankford and Cortez Masto, and Representatives Buchanan, Panetta, Moore and Schneider for their bipartisan leadership on this issue,” said Brian Graff, CEO, American Retirement Association.”
