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H 8189Credits & Incentives

Taxation - Employer Tax Credits for Retirement Plan Establishment, Participation and Auto-Enrollment

This bill provides tax credits to small businesses that establish retirement savings plans and use automatic enrollment for employees.

Held for study
Population
Affected
35
Email Legislator
Introduced Feb 27, 2026Committee House Finance

Plain-English Summary

This legislation establishes new tax credits for small businesses in Rhode Island to encourage them to offer retirement plans to their employees. Specifically, employers with 100 or fewer workers can receive a tax credit of $100 for each employee who participates in a qualified retirement plan, up to a maximum of $10,000 per year. Furthermore, the bill offers an additional credit to businesses that set up automatic enrollment for these plans, providing extra financial incentives to help employees start saving for the future. The credits become available for tax years starting in 2027.

For younger readers

When people get older and stop working, they need money saved up to live on. This is called retirement. Right now, many jobs don't help workers save this money. This new law tries to fix that. It tells small business owners that if they help their workers save money for the future, the government will let the business pay less in taxes. It is like a reward for the business owners to encourage them to take better care of their workers' future needs.

Who & Where It Applies

Impacted groups
Small business ownersEmployees of small businessesTax accountantsFinancial plannersDepartment of Revenue
Impacted communities
All

Constitutional & Fiscal Check

None Likely

Estimated cost
None
Estimated revenue
None

Bill Analysis

Both viewpoints
For Progressives
  • Expands the social safety net by providing incentives for small businesses to offer retirement plans, potentially reducing future poverty among workers who currently lack employer-sponsored savings options.
  • Promotes the use of automatic enrollment features, which have been proven to significantly increase participation rates among low-income and marginalized workers who might otherwise delay saving.
  • Targets assistance specifically to small employers rather than large corporations, helping local businesses compete for talent while fostering long-term financial security for the local workforce.
  • Relies on voluntary corporate tax incentives rather than mandating retirement coverage, which may result in continued gaps in coverage for the most vulnerable workers.
  • Reduces state tax revenue through business tax credits, which could otherwise be utilized to fund direct public services, education, or immediate social welfare programs.
  • Supports a market-based, private financial industry approach to retirement rather than strengthening public social security systems or creating a state-guaranteed retirement option.
For Conservatives
  • Reduces the tax burden on small business owners, allowing them to retain more capital to reinvest in their companies and the local economy.
  • Utilizes a voluntary, market-based approach to solving retirement security issues rather than imposing heavy-handed government mandates or regulations on employers.
  • Aligns state tax policy with federal laws (the SECURE Act), reducing administrative complexity and regulatory confusion for business owners operating in the state.
  • Complicates the state tax code by adding specific credits and rules, rather than simply lowering the overall tax rate for all businesses equally.
  • Encourages the use of automatic enrollment features, which can be viewed as paternalistic government "nudging" that interferes with individual employee financial autonomy.
  • Creates additional bureaucratic reporting requirements for small businesses to prove eligibility and compliance to the tax administrator in order to receive the benefit.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 84 additions

SECTION 1. Legislative Findings and Purpose The General Assembly finds that:

(1) A substantial number of Rhode Island workers lack access to employer-sponsored retirement plans;

(2) Small employers face disproportionate financial and administrative barriers in establishing and maintaining retirement plans;

(3) The federal Setting Every Community Up for Retirement Enhancement Act of 2019, as amended (“SECURE Act”), established tax incentives to encourage small employers to adopt retirement plans, increase employee participation, and implement automatic enrollment features; and

(4) Aligning state tax incentives with federal retirement policy will expand coverage, increase savings rates, and strengthen the long-term financial security of Rhode Island workers. It is therefore the purpose of this act to encourage the establishment and maintenance of employer-sponsored retirement plans by providing tax credits tied to employee participation and automatic enrollment, consistent with federal law.

SECTION 2. Title 44 of the General Laws entitled "TAXATION" is hereby amended by adding thereto the following chapter: 44-55.1-1. Definitions. As used in this chapter:

(1) “Automatic enrollment feature” means a feature of a qualified retirement plan under which eligible employees are automatically enrolled at a specified contribution rate unless the employee affirmatively elects otherwise, consistent with the Internal Revenue Code.

(2) “Eligible costs” means ordinary and necessary costs paid or incurred by an eligible employer in connection with:

(i) The establishment or administration of a qualified retirement plan; and

(ii) Employer contributions or matching contributions made on behalf of eligible employees.

(3) “Eligible employee” means an employee who:

(i) Is employed by an eligible employer;

(ii) Meets the eligibility requirements of the qualified retirement plan; and

(iii) Participates in the plan during the taxable year through elective deferrals or on whose behalf employer contributions are made.

(4) “Eligible employer” means an employer that:

(i) Employed one hundred (100) or fewer employees who received at least five thousand dollars ($5,000) in compensation during the preceding taxable year; and

(ii) Did not maintain a qualified retirement plan covering substantially the same employees during the three (3) taxable years preceding the first taxable year for which a credit is claimed, except as otherwise permitted under applicable federal law.

(5) “Qualified retirement plan” means a retirement plan described in the Internal Revenue Code and eligible for favorable federal tax treatment including, but not limited to, plans described in §§ 401(a), 401(k), 403(b), 408(k), or 408(p).

(6) “Tax credit” means a credit allowed against Rhode Island income tax pursuant to this chapter. 44-55.1-2. Retirement plan participation credit.

(a) An eligible employer shall be allowed a nonrefundable credit against its tax liability imposed under chapters 11, 14, 15, or 30 of title 44, for each taxable year in which one or more eligible employees participate in a qualified retirement plan.

(b) The credit attributable to any eligible employee shall not exceed one hundred dollars ($100) per employee per taxable year, and the aggregate credit allowed to any eligible employer shall not exceed ten thousand dollars ($10,000) per taxable year.

(c) No credit shall be allowed under this section for costs attributable to employees who do not participate in the qualified retirement plan during the taxable year.

(d) The credit allowed under this section shall not reduce a taxpayer’s liability below the minimum tax imposed under the applicable chapter of this title. 44-55.1-3. Auto-enrollment enhancement credit.

(a) In addition to the credit allowed under § 44-55.1-2, an eligible employer that includes an automatic enrollment feature in its qualified retirement plan shall be allowed an additional nonrefundable credit against its tax liability.

(b) The auto-enrollment enhancement credit shall be determined on a per–eligible employee basis for each eligible employee subject to automatic enrollment during the taxable year.

(c) The credit allowed under this section shall not exceed one hundred dollars ($100) per eligible employee per taxable year, subject to an aggregate annual cap of one thousand dollars ($1,000) per eligible employer.

(d) The auto-enrollment enhancement credit may be claimed for up to three (3) consecutive taxable years beginning with the first taxable year in which the automatic enrollment feature is implemented.

(e) No credit shall be allowed under this section unless the automatic enrollment feature complies with applicable requirements of the Internal Revenue Code.

(f) The credit allowed under this section shall not reduce a taxpayer’s liability below the minimum tax imposed under the applicable chapter of this title. 44-55.1-4. Nondiscrimination; coordination with other credits.

(a) A qualified retirement plan for which a credit is claimed under this chapter shall be offered on a nondiscriminatory basis, consistent with the requirements of the Internal Revenue Code.

(b) No credit shall be allowed under this chapter for any eligible costs that are used by the taxpayer to claim any other credit, deduction, or incentive under this title.

(c) If a taxpayer is liable for tax under both chapters 14 and 15 of title 44, the taxpayer shall elect the chapter under which the credit shall be applied, and the credit shall be applied to only one chapter for the taxable year. 44-55.1-5. Pass-through entities. If the eligible employer is a pass-through entity including, but not limited to, a partnership, limited liability company, or S corporation, the tax credit allowed under this chapter shall be passed through to the owners, partners, or members in the same manner as income, in proportion to their ownership interests. 44-55.1-6. Carryforward of unused credit. Any unused portion of a credit allowed under this chapter may be carried forward for up to three (3) consecutive taxable years, subject to regulations adopted pursuant to this chapter. 44-55.1-7. Coordination with federal law.

(a) This chapter shall be interpreted and administered, to the extent practicable, in a manner consistent with the federal Setting Every Community Up for Retirement Enhancement Act, as amended.

(b) In the event of a conflict between this chapter and applicable federal law governing qualified retirement plans, federal law shall control. 44-55.1-8. Reporting and evaluation. The tax administrator shall annually report to the general assembly the number of taxpayers claiming the credit, the total amount of credits claimed, and any other information necessary to evaluate the fiscal and economic impact of the credit, consistent with § 44-48.2. 44-55.1-9. Regulations. The tax administrator, in consultation with the office of the general treasurer, shall promulgate rules and regulations necessary to implement and administer the provisions of this chapter.

SECTION 3. This act shall take effect for taxable years beginning on or after January 1, 2027.