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In anticipation of the coming mid-term elections, we will be considering some key Democratic retirement policy priorities. The two most significant (certainly in terms of budget impact) are proposals to expand the Saver’s Match and to implement a universal auto-IRA/auto-401(k).
In this article we cover one Saver’s Match proposal, the “Saver’s Match Enhancement Act of 2026,” introduced by Senator Wyden (D-OR), Ranking Member of the Senate Finance Committee, on September 28, 2026.
Effective in 2027, SECURE 2.0 changes the pre-2027 “Saver’s Tax Credit” into a “Saver’s Match” – an in-plan (or an “in-IRA”) matching contribution. The new Saver’s Match, unlike the prior (non-refundable) Saver’s Tax Credit, will be payable even if the “taxpayer” receiving it has no income tax liability.
Thus, under current law, beginning in 2027, Saver’s Match contributions will be paid (by Treasury) directly to an individual’s retirement savings vehicle. The IRS has published preliminary guidance on how this new process is supposed to work.
The (current) amount of the Saver’s Match is (up to) 50% of the first $2,000 of taxpayer contributions to a retirement plan, for a maximum of $1,000 per eligible individual. Relatively low income limits apply for eligibility – for joint filers, the maximum credit is available for those with incomes of $41,000 or less and is completely phased out at incomes of $71,000.
Senator Wyden’s bill would (significantly) increase Saver’s Match income limits, double the amount of the credit, and make the credit and an attributable earnings completely non-taxable.
The following table summarizes changes Senator Wyden’s bill would make to current rules.
| Present Law | Proposed Change | |
|---|---|---|
| Income Limits | (Joint return) $41,000 completely phased-out at $71,000 | (Joint return) $85,000 completely phased-out at $115,000 |
| Match amount | 50% of the first $2,000 in contributions (maximum $1,000) | Increase to 100% of the first $2,000 (maximum $2,000) |
| Indexing | $2,000 cap not indexed for inflation | Indexed for inflation |
| Taxation | Not taxed on the way in/ taxed on the way out | Not taxed on the way in/not taxed on the way out |
Explaining the change in taxation: Under current rules, the Saver’s Match is treated as a “pre-tax contribution” – not taxed on the way in but taxed on the way out. As reflected in the table, under the Wyden proposal, it would be given Roth treatment on distribution – that is, not taxed on the way out. But the Saver’s Match would also not be taxed on the way in – so, effectively, neither the contribution nor any earnings would be taxed.
Interestingly – in view of the possibility of a divided government after the mid-terms – there may be bipartisan support for some version of Senator Wyden’s proposal. The Administration has indicated that it also wants an expansion of the Savers’ Match.
The biggest obstacle is cost. Senator Wyden’s proposal has not yet been scored by the Congressional Budget Office, but its cost is likely to be significant. Moreover, this cost would only increase if the Democrats’ other retirement major policy objective – a universal auto-IRA/auto-401(k) – were also adopted.
Congressman Neal, Ranking Member of the House Ways and Means Committee is also said to be considering introducing a Saver’s Match expansion proposal.
We will continue to follow this issue.
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This is a publication of O3 Plan Advisory Services. If you have any comments, or have questions about regulatory developments, please contact your relationship manager or Mike Barry at mbarry@octoberthree.com.
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