Congress looks to make retirement plan changes

Although 2025 was a quiet year for retirement plan legislation, several retirement-related bills are currently pending in Congress. In this quarter’s blog, we’ll provide an overview of a few of the more significant proposals that you may want to keep on your radar. 

Small Nonprofit Retirement Security Act of 2025 

Generous income tax credits are available to small employers that start a retirement plan. However, nonprofit employers do not pay income tax, and accordingly, there is no tax incentive encouraging a small nonprofit employer (with no more than 100 employees) to start a 401(k) plan. The bipartisan Small Nonprofit Retirement Security Act of 2025, which was introduced in the House and Senate this summer on a bipartisan basis, would provide payroll tax credits for small nonprofit employers that start a 401(k) plan. Specifically, there would be an annual startup payroll credit of up to $5,000 for the first 3 years of the plan, an annual 3-year $500 credit for plans with an automatic enrollment feature, and up to a $1,000 employer contribution credit per employee (with annual wages of less than $100,000) over a 6-year period.

Unclaimed Retirement Rescue Plan 

This bipartisan bill, introduced in the House in September by two former state treasurers, would allow plan fiduciaries to distribute small unclaimed retirement account balances to a state’s unclaimed property fund. According to one of the bill’s co-sponsors, “there are 29.2 million left-behind or forgotten 401(k) accounts holding approximately $1.65 trillion in assets. The workers and families who own these funds often have no idea of their existence because they have changed jobs or their former employer has gone out of business.” The bill would address this so-called leakage issue by allowing a plan to transfer unclaimed retirement distributions between $50 and $5,000 to state unclaimed property programs, with the goal of making it easier for workers to find their forgotten retirement benefits. Before transferring funds to state programs, the bill would require plan fiduciaries to take specific steps to try to complete plan distributions to participants.

Retirement Rollover Flexibility Act 

Workers can currently roll over their Roth accounts in an employer-sponsored retirement plan to a Roth IRA, but not vice versa. This bill, with co-sponsors from both political parties, was introduced in the House and Senate in December 2025 and would allow workers to roll over their Roth IRAs to a Roth 401(k), Roth 403(b), or governmental Roth 457(b) plan. According to lawmakers sponsoring the legislation, this would allow workers to consolidate their retirement accounts, thus reducing the complexity and costs associated with maintaining multiple accounts.

Helping Young Americans Save for Retirement Act

An ERISA-covered employer plan can exclude employees from participating in a plan if the employee has not attained age 21. This piece of bipartisan House and Senate legislation, introduced in spring/summer 2025, would lower the age 21 requirement to age 18 for an employee to be eligible to make 401(k) or 403(b) elective deferrals.

Emergency Savings Enhancement Act of 2025 

SECURE 2.0, enacted into law in 2022, permits a worker (if allowed by a plan) to maintain a savings account within a 401(k), 403(b), or governmental 457(b) plan, known as a pension-linked emergency savings account (PLESA). This proposed bipartisan legislation would increase the current $2,500 PLESA maximum contribution amount to $5,000 and would allow highly compensated employees to maintain a PLESA. PLESAs were initially introduced to provide a way for workers to meet emergency expenses — through a savings account maintained in an employer-sponsored retirement plan — without having to access their retirement funds to pay for emergency expenses. This proposed legislation is designed to make the current PLESA provisions more attractive to employers and employees.

ERISA Litigation Reform Act 

This bill was introduced in the House in December and is aimed at curbing frivolous class action lawsuits against retirement plan fiduciaries. Class action ERISA litigation has expanded exponentially, costing plan fiduciaries billions of dollars in settlements even though the litigation is often seen as meritless. Technical in nature, this bill would provide two tools aimed at reducing the costly, meritless lawsuits. First, the legislation would require plaintiffs who allege a breach of fiduciary duty under ERISA to plead facts and prove that a prohibited transaction exemption does not apply. Second, the legislation, subject to narrow exceptions, would prohibit extensive discovery while a motion to dismiss is pending. Although it’s unclear whether there is bipartisan support for the legislation, several leading retirement plan industry groups support the bill.

So, what’s next?

There are a few observations we can make when examining these proposed bills. First, the proposals largely enjoy bipartisan Congressional support. Second, the proposed bills are aimed at expanding the number of workers that will be covered by employer-sponsored retirement plans and increasing retirement security. Finally, the proposed bills are supported by leading retirement industry groups. In our estimation, it seems these factors could increase the likelihood that retirement legislation will be enacted in 2026, perhaps as part of a larger omnibus bill.

While it’s still early for most of these proposed bills, you can rest assured that UBT’s Retirement Plan Services team will continue to monitor these bills and assess potential impact to your plan. If you have questions about any of the proposed bills, please contact your relationship manager and we’ll be happy to help.