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Corporate Tax Incentives Congress Can Add To Encourage Retirement Savings
by Christopher Carosa, February 04, 2025
If we see a SECURE Act 3.0 on the horizon, what will it look like? How will it impact corporate retirement plan sponsors? What kinds of incentives might an updated law offer?
We’re at that point in the legislative cycle where there are too many moving parts to get a good grasp of things. Call it “the fog of war.” Things are moving fast and in all directions with Trump’s second term. Except for maybe some of the cabinet candidates, including the Department of Labor nominee.
A bigger question is, where does a potential SECURE Act 3.0 fit within the grand scheme of things? Will it be a stand-alone bill or part of a broader reconciliation process? The mechanism used to craft this legislation will influence the final result.
Last week we talked about the stick (see “Will Extending Tax Cuts Cost Retirement Savers?” FiduciaryNews.com, January 28, 2025). This week we will focus on the carrot.
If you look at headlines in the retirement industry trade press, rarely does a week go by when you don’t see an article lamenting the low retirement savings numbers. Whether it’s the actual number of savers or total dollars saved, the consensus is workers aren’t saving enough.
How do we change this? How about giving employers an incentive to encourage workers to save for their retirement?
“This is a great idea; businesses should always look at ways to reward employees not just with compensation but with important benefits like retirement plans,” says Christine Mueller Coley, wealth advisor at SteelPeak Wealth Management in Woodland Hills, California. “For instance, a corporation can provide employees with a non-elective plan contribution – they contribute to everyone’s plans whether or not the employee participates – this incentive removes barriers for higher earners in the company to make larger contributions for themselves because they are making sure everyone participates. Companies can also do automatic enrollment for employees even though they could end up opting out, but this can encourage employees to get started. A good 401k match is huge – this is something you should really focus on when comparing compensation packages when looking for places to work.”
What companies have the largest volume of non-participating employees saving for retirement? These would be employers with few employees.
“Tax credits for small businesses to set up retirement plans or offer matching contributions would be incredibly effective,” says Brandy Burch, CEO, Benefitbay in Kansas City Missouri. “These incentives could make it easier for companies to adopt plans like 401ks or ICHRAs, providing employees with better opportunities to secure their financial futures.”
There are plenty of specific tweaks Congress can make to encourage more workers to save for retirement.
“Congress could offer tax credits to small businesses for starting new retirement plans, such as 401k plans or SIMPLE IRAs, or expand existing credits for plan administration costs,” says Richard Bavetz, investment advisor at Carington Financial in Westlake Village, California. “Additional incentives might include tax deductions for employer contributions or matching funds to employee accounts. These measures would be effective because they lower the financial and administrative barriers for businesses, particularly smaller ones, to provide retirement benefits. By increasing plan accessibility, these incentives could boost retirement savings participation across the workforce.”
The Roth option represents another way to increase incentives. This might be more palatable to legislators concerned about balancing the budget.
“Congress and this Administration have a track record of encouraging corporations to invest in retirement plans,” says Eric Steffy, founder & CEO at Federal Solutions Support in Daytona Beach, Florida, says, . The SECURE Act expands access to retirement accounts for many of us. What is being telegraphed is that there will be a greater emphasis on Roths—plans where you invest money that no longer have a tax burden, except on the interest earned, because you paid taxes on the money before it went into savings. When you look ahead at 2026, think Roth with the ability to make even higher catch-up contributions. It’s a win for you and for the government; the kind of win near-retirees may not be accustomed to seeing.”
Alas, we may remain in this murky fog of war for some time.
“As we look ahead, it is essential for plan sponsors and fiduciaries to always be prepared for any tax policy changes or other legislative actions that might influence the benefits offered through ERISA plans,” says Myles McHale, an instructor at the Cannon Financial Institute in Bonita Springs, Florida. “This includes any implications from extending past tax cuts or new proposals that may be pending. It’s crucial for Congress to have a glide path in place so that plan sponsors and fiduciaries can adjust their offerings accordingly in response to any legislative change. While it is still too early to speculate on specific changes, it remains to be seen whether there might be additional tax benefits for corporations that enhance their retirement plan package offerings for employees.”
It’s hard to predict the future, but it’s fun to talk about it.
Christopher Carosa is an award-winning online news producer and journalist. A dynamic speaker, he’s the author of 401(k) Fiduciary Solutions, Hey! What’s My Number? How to Improve the Odds You Will Retire in Comfort, From Cradle to Retirement: The Child IRA, and several other books on innovative retirement solutions.