The new Saver's Match program, which launches in 2027, allows low-income employees to receive a 50% federal matching contribution of up to $1,000, in addition to any employer match. However, before the program launches, the Internal Revenue Service and the Department of the Treasury have issued a notice requesting comments on Saver's Match contributions, which will be paid by the Treasury under an upcoming provision in the federal SECURE 2.0 legislation.
Saver's Match contributions represent a new approach to promoting retirement savings aimed to improve the long-term financial security for millions of low- to moderate-income Americans. By making annual contributions of up to $2,000 to a 401(k) plan or an Individual Retirement Account (IRA), an employee can receive as much as an annual $1,000 Saver's Match contribution from the Treasury.
The Saver's Match program is scheduled to replace the existing Saver's Credit, a nonrefundable tax credit available to eligible workers, providing a maximum credit of $1,000 annually per person and $2,000 per married couple. However, the credit was not deposited directly into retirement accounts. SECURE 2.0 sought to address this issue by changing the "credit" to a "match" – using the federal funds as an automated direct deposit feature.
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The amount of an individual's Saver's Match contribution depends on the individual's income or joint income level. For example, for a married individual filing jointly, the Saver's Match contribution phases out completely at a joint income of $71,000, and, for a single filer, the Saver's Match contribution phases out completely at an income of $35,500.
If a 35-year-old employee receives five consecutive Saver's Matches of $1,000, they would have an extra $29,274 in retirement income at age 65, according to the Retirement Clearinghouse.
The IRS notice requests comments on all aspects of Saver's Match contributions from employers, plan sponsors, as well as tax preparers, retirement plan administrators and employees, including:
- Eligibility for Saver's Match contributions
- How Saver's Match contributions would be claimed
- How the account receiving Saver's Match contributions would be designated
- The process for completing Saver's Match contributions
- Saver's Match recovery taxes on specified early distributions
- Reporting and disclosure for Saver's Match contributions
- How the Treasury and the IRS could ensure that individuals in underserved communities know how to participate and receive the full benefits of Saver's Match contributions
Related: Saver's Match: New SECURE 2.0 program could close the wealth gap in 401(k)s
The Saver's Match is likely to encourage more employees who don't currently participate in their employers' sponsored 401(k) plan to begin doing so. Employers might begin educating employees who are eligible for Saver's Match about the impact the new contributions can make toward retirement savings.
Comments to the IRS and the Treasury can be input by Nov. 4, 2024 at www.regulations.gov.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
