S.1840 - Retirement Investment in Small Employers Act (119th Congress)
Summary
S.1840, the Retirement Investment in Small Employers Act, aims to amend the Internal Revenue Code of 1986 to provide a microemployer pension plan startup credit. This bill proposes to increase the startup credit for qualified microemployers by modifying Section 45E of the Internal Revenue Code. The bill was introduced in the Senate on May 21, 2025, and referred to the Committee on Finance.
The key provision involves increasing the percentage of the credit from 50% to 100% and increasing the limit from $500 to $2,500 for qualified microemployers. A qualified microemployer is defined as one that would be an eligible employer if section 408(p)(2)(C)(i)(I) were applied by substituting 10 for 100, and accepts payment of the matching contribution under section 6433.
The amendment is set to apply to taxable years beginning after December 31, 2024.
Expected Effects
If enacted, this bill would likely incentivize more microemployers (those with 10 or fewer employees) to establish pension plans for their employees. This would provide greater retirement savings opportunities for employees of these small businesses. The increased startup credit could reduce the financial burden on microemployers associated with establishing and maintaining these plans.
This could lead to increased retirement savings among employees of microenterprises. It may also simplify the process for these businesses to offer retirement plans. This could lead to greater financial security for a segment of the workforce that may not otherwise have access to employer-sponsored retirement plans.
Potential Benefits
- Increased Retirement Savings: More employees of microenterprises may have access to and participate in retirement savings plans.
- Incentivizes Small Businesses: The increased startup credit makes it more financially feasible for microemployers to offer pension plans.
- Financial Security: Employees gain greater financial security in retirement due to increased savings opportunities.
- Simplified Plan Establishment: The bill could streamline the process for microemployers to set up and maintain pension plans.
- Attract and Retain Talent: Offering retirement benefits can help microenterprises attract and retain employees.
Potential Disadvantages
- Potential for Abuse: Increased credits could potentially be exploited through fraudulent or improper plan setups.
- Complexity: The interaction with existing sections of the Internal Revenue Code (e.g., 408(p)(2)(C)(i)(I) and 6433) adds complexity.
- Limited Scope: The benefits are primarily targeted at microemployers, potentially leaving out slightly larger small businesses.
- Administrative Burden: Microemployers may still face administrative burdens in setting up and managing pension plans, even with the credit.
- Cost to Taxpayers: The increased credits will likely result in a cost to taxpayers, potentially increasing the budget deficit.
Constitutional Alignment
This bill appears to align with the general welfare clause of the US Constitution, as it aims to promote the financial security of citizens by incentivizing retirement savings. The 'general Welfare' clause (Preamble) allows Congress to enact laws that promote the overall well-being of the population.
Article I, Section 8, Clause 1 grants Congress the power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States. This bill falls under Congress's power to tax and spend for the general welfare.
There are no apparent conflicts with specific constitutional amendments or limitations on Congressional power. The bill does not infringe on individual liberties or rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).