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AARP Backs Proposed Tax Credit to Help Retirement Savers

Small business tax break would offset retirement plan start-up costs

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AARP is urging Congress to pass legislation that would boost a federal tax credit to help more small businesses offset the costs of offering a retirement savings plan to their workers.

The AARP-backed Retirement Investment in Small Employers (RISE) Act would give businesses with up to 10 employees a $2,500 credit on their federal taxes to cover start-up and administration costs associated with setting up a workplace retirement plan like a 401(k).

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Americans are 15 times more likely to save if they can do so through their paychecks, according to AARP research. But more than half of all people working in the private sector are unable to save through work.

For very small businesses (those with fewer than 10 employees), the number is even higher. Nearly 8 in 10 workers at these businesses lack access to a workplace-sponsored plan, we told federal lawmakers in a May 23 endorsement letter.

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The bill “will help millions of people who work at small businesses put money away for retirement and build their nest egg, while helping these small companies recruit and retain their employees,” wrote Bill Sweeney, AARP senior vice president for government affairs.

Under a 2022 law supported by AARP, small businesses can get a federal tax credit of $250 per eligible employee. But for those with just a few workers, that credit may be too small to recoup the administrative costs of adding a 401(k) plan to their benefits package, said Clark Flynt-Barr, an AARP government affairs director who handles retirement security issues. Increasing the credit to a flat $2,500 would provide a better incentive, she said.

This is the latest of several measures we’ve endorsed to address the nation’s retirement savings crisis, including a bill that would create a federal retirement savings plan for people who lack access to one through their jobs. AARP is also fighting to protect a new federal rule that requires financial advisers to put the interests of retirement savers ahead of their own.

Read our letters to House and Senate lawmakers and learn more about planning for retirement.

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