Small Nonprofit Retirement Security Act of 2025
The Small Nonprofit Retirement Security Act of 2025 would extend two existing federal retirement-saving incentives to tax-exempt eligible small employers (501(c) organizations). Specifically, it makes the Section 45E “startup costs” credit and the Section 45T “retirement auto-enrollment” credit available to eligible nonprofits. Instead of being credits against income tax, these credits would be treated as payroll tax credits (against the employer’s FICA payroll tax under Section 3111) and would be capped at the amount of payroll tax the nonprofit pays in the applicable year. The bill defines “tax-exempt eligible employer” as a 501(c) organization exempt from tax under 501(a). It also creates funding offsets by transferring amounts equivalent to the foregone revenue to the Social Security and Medicare trust funds. The effective date applies to taxable years beginning after December 31, 2024. Overall, the measure is designed to encourage nonprofits to establish retirement plans and auto-enrollment for their employees by making the credits more directly offsetting by payroll taxes.
Key Points
- 1Expands eligibility to tax-exempt eligible employers (501(c) nonprofits) for the existing small-employer pension plan startup costs credit (45E) and the retirement auto-enrollment credit (45T).
- 2For nonprofits, the credits are treated as credits against payroll tax (Section 3111(g)) rather than against income tax.
- 3The nonprofit credit amount is the lesser of the original credit under 45E/45T (as if the nonprofit were not exempt) or the employer’s total payroll tax paid during the applicable calendar year.
- 4The payroll tax credit is allocated across calendar quarters in an applicable year, with a cap aligning the total credit to the nonprofit’s total payroll tax due, using a mechanism similar to the rule in Section 24(d)(2)(C).
- 5Funding and budget offset: the amendments are paired with appropriations to the Social Security (Old-Age and Survivors) Trust Fund and the Disability Insurance Trust Fund, designed to offset the revenue loss from the expanded credits.