S. 2365: Small Nonprofit Retirement Security Act of 2025

The Small Nonprofit Retirement Security Act of 2025 aims to amend the Internal Revenue Code to provide specific tax credits to eligible small nonprofits (tax-exempt employers) that establish retirement plans. The key provisions of the bill are as follows:

1. Credit for Small Employer Pension Plan Startup Costs

This section of the bill introduces a credit for tax-exempt eligible employers to help offset the costs associated with starting a pension plan. The credit amount is the lesser of:

• The standard credit amount calculated under existing laws for establishing a pension plan.
• The total payroll taxes paid by the employer during the relevant calendar year.

Here, a tax-exempt eligible employer is one that falls under the definition provided in section 501(c) of the tax code, meaning they are generally recognized as nonprofit entities.

2. Retirement Auto-Enrollment Credit

The bill also includes a credit for retirement auto-enrollment, which supports tax-exempt small employers that implement automatic enrollment in their retirement savings plans. Similar to the previous credit, the auto-enrollment credit is limited to the lesser of:

• The calculated credit available under current laws for automating enrollment.
• The amount of payroll tax paid by the employer in the applicable calendar year.

Again, this credit applies specifically to employers classified as tax-exempt under section 501(c).

3. Payroll Credit

This provision provides a credit against payroll taxes for eligible nonprofit employers that qualify under the pension plan startup costs or auto-enrollment categories. The amount eligible for credit is based on the credits derived from the previous sections, with similar limitations:

• The total payable credit cannot exceed the payroll tax imposed on wages paid to employees during the applicable year.

4. Effective Date

The amendments made by this bill will take effect for taxable years starting after December 31, 2024. This means that the new credits would be accessible beginning with the 2025 tax year.

5. Transfers to Social Security Trust Funds

To ensure financial integrity, the bill mandates that any revenue reductions resulting from these tax credits will be compensated by appropriating funds to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund. This is intended to maintain funding levels that would have otherwise occurred without the bill.

Relevant Companies

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