The long-standing saver’s tax credit, which is a nonrefundable tax credit for low to middle taxpayers, is being replaced, beginning next year, with a government matching contribution (up to $1,000 annually) paid into a plan (or IRA). For nearly the first time, funds are flowing from the government into a plan (or IRA), rather than out to the government. This takes a coordinated effort by recordkeepers, plan sponsors, IRA providers, and the government alike, as no one wants to leave retirement savings on the table.
Notice 2026-48 (in Q&A format) provides the first round of guidance, and this Notice (along with comments hereon) will provide a strong foundation for future proposed regulations. Importantly, the Notice provides a path using a conduit IRA to simplify the processing of these contributions, which may avoid onerous reporting, plan restrictions, and complex tax implications for participants and plan sponsors.
The Notice also provides important information regarding who is eligible for the match, how to get it (pending Form 8880-A), how it is calculated, how it is taxed, how’s its treated for plan (and IRA) purposes (pre-tax contribution vs rollover treatment), how to correct erroneous match, and what ideas are being considered to get the funds from the government into these plans/IRA (which is no easy feat). For plans, the lead contenders are: (1) registration path where plan sponsors register upfront to accept these contributions and are made through a conduit IRA and treated as rollover contributions, (2) automatic match plan using the auto-portability model to make payments directly in a plan (subject to the special reporting and plan restrictions on not allowing hardship withdrawals, and saver’s match recovery tax), and (3) rollover path that is a transaction-by-transaction approach where the participant get a confirmation number from the IRS that they provide to the plan sponsor who then provides information to IRS to facilitate the transfer via a conduit IRA.
The Notice also provides sample language to add to enrollment notices to get the word out, and indicates a plan amendment will not be needed until the end of 2028 Plan Year and that model amendment language is pending. Stay tuned and fingers crossed that the industry and government can make this work as retirement savings is for everyone (and every little bit counts)!
Saver’s Match from the Federal Government
A new financial incentive to save for retirement
Under the federal government’s new Saver’s Match program to promote
retirement savings, the federal government will contribute as much as $1,000 to a retirement plan or IRA of a qualifying low- or moderate-income individual who saves for retirement. For 2027, the income limit for receiving any Saver’s Match is $35,500 for a single individual and $71,000 for a married filing jointly individual. If you qualify, your Saver’s Match will be up to 50% of $2,000 of your annual contributions to your plan or IRA.How to claim your Saver’s Match
