H.R. 7556 — Pensions for All Act

This section defines the following terms for purposes of the Act: (1) covered retirement program as a retirement program other than FERS that the Secretary determines provides benefits comparable to FERS for an employee (as defined in 5 U.S.C. §8401 on the day before enactment); (2) employee and employer as having the meanings given those terms in section 3 of ERISA (29 U.S.C. §1002); (3) FERS as the Federal Employees Retirement System under 5 U.S.C. chapter 84; and (4) Secretary as the Secretary of Labor.

This section requires each employer to either (1) make available to employees a covered retirement program or (2) notify the Secretary that employees will participate in the Federal Employees Retirement System (FERS); self-employed individuals must similarly either enroll in a covered retirement program or notify the Secretary to participate in FERS. The section further permits employers and self-employed individuals, at a frequency of not less than annually as determined by the Secretary in coordination with the Director of the Office of Personnel Management, to elect to switch between these options. (FERS provides federal civilian employees a three-part retirement system consisting of a defined benefit annuity, Social Security benefits, and access to the Thrift Savings Plan.)

This section expands the Federal Employees Retirement System (FERS)—which provides federal civilian employees with a defined benefit annuity, Social Security coverage, and Thrift Savings Plan (TSP) access—to include covered non-Federal employees (i.e., those employed by non-Federal employers lacking a retirement plan comparable to FERS, as determined by the Secretary of Labor) and covered self-employed individuals (i.e., self-employed persons lacking such a comparable plan). It (1) defines their "basic pay" as annual income attributable to covered activities; (2) makes their post-enactment service creditable toward FERS annuities; (3) requires covered non-Federal employers to deduct and withhold the standard employee contribution percentage (currently 4.4% of basic pay through 2025, increasing thereafter) from covered employees' basic pay, with covered self-employed individuals responsible for depositing an equivalent amount; and (4) mandates employer contributions from covered non-Federal employers and self-employed individuals, reduced to 50% of the normal rate (currently 4.4% normal cost plus 0.2% through 2025 for legacy employees) for employers with ≤$25 million in annual revenue, with phased increases based on revenue exceeding $25 million up to $75 million, and additional self-employed contributions scaled at 50% of income over $75,000 divided by $50,000. (Thus, these participants gain FERS annuity eligibility while their employers/self face scaled contribution obligations in lieu of offering comparable plans.)

This section establishes a new nonrefundable income tax credit under new IRC §36A (inserted after §36) for eligible taxpayers equal to up to 50% of qualified pension contributions paid during the taxable year, with the applicable percentage phasing out (but not below zero) for employers based on the ratio of gross receipts exceeding $25 million to $75 million (i.e., fully phasing out at $100 million in receipts) and for self-employed individuals based on the ratio of income exceeding $75,000 to $50,000 (i.e., fully phasing out at $125,000 in income). Qualified pension contributions include (1) for covered non-Federal employers or covered self-employed individuals (as defined in 5 U.S.C. §8401) electing under 5 U.S.C. §§8423(a)(4)(E) and 8432(c)(4)(E) not to receive reduced contributions, contributions under those sections of the Federal Employees Retirement System (FERS); and (2) for other employers or self-employed individuals, nonelective employer contributions or individual contributions to a covered retirement program (as defined in sec. 2 of the Pensions for All Act). For employers, the credit is included in the general business credit under IRC §38(b)(42) (newly added); denies double tax benefits for the contributions; and makes conforming amendments to IRC §§6211(b)(4)(A) and the table of sections. Applies to contributions made after enactment.

This section establishes a new excise tax under IRC §4980J on (1) employers that fail to make available a covered retirement program (as defined in §2 of the Pensions for All Act) to all employees or, if a covered employer, to make required contributions under 5 U.S.C. §§8423(a) and 8432(c); and (2) self-employed individuals that fail to participate in such a program or, if a covered self-employed individual, to make those contributions. The tax equals $10 per day ($10 amount inflation-adjusted after 2026) for each employee or self-employed individual during the noncompliance period (from date of failure until corrected or, for employers, three months after employment ends), subject to limitations including no tax if undiscovered exercising reasonable diligence, a $500,000 cap per taxable year for unintentional failures, and possible waiver by the Secretary of the Treasury. Employer liability applies jointly and severally to controlled groups under IRC §414(b), (c), (m), or (o); the provision includes a conforming amendment to the table of sections for IRC chapter 43; and amendments apply to plan years beginning after December 31, 2025.

This section prohibits an employer from reducing any form of compensation provided to an employee employed on or before the date of enactment due to the requirement under this Act that the employee be enrolled in a covered retirement program or FERS.