Are Tax Credits for Launching New Retirement Plans Available to Tax-Exempt Employers?

Q: I read an Ask the Experts column from 2023 stating that tax-exempt employers are not eligible for credits for starting a retirement plan that are available to for-profit entities. I thought that tax-exempt entities could now receive such a credit against their payroll tax liability. Is this correct?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: No, this is not correct, but it is possible that it could be in the future. There is proposed legislation in the Senate, the Small Nonprofit Retirement Security Act of 2025, that would extend the startup tax credits under the SECURE 2.0 Act of 2022, along with certain other retirement plan tax credits, to tax-exempt employers. As you describe, the mechanism for such a credit would be a credit against payroll tax liability. However, this proposal is not yet law. Thus, as it stands today, these tax credits are not available to tax-exempt employers.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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