Guide to the New Saver’s Match under SECURE 2.0

The landscape of federal retirement incentives is undergoing a monumental shift, and we are here to guide you through it.

For years, the Retirement Savings Contributions Credit, commonly known as the Saver’s Credit, has provided a nonrefundable tax credit to eligible individuals who contribute to qualifying retirement plans and IRAs.

However, under section 103 of the Consolidated Appropriations Act, 2023, widely known as the SECURE 2.0 Act of 2022 (SECURE 2.0 Act), a transformative change is on the horizon.

The Department of the Treasury and the Internal Revenue Service (IRS) have recently outlined their intentions to issue regulations regarding these changes in Notice 2026-48. In this comprehensive guide, we will break down exactly what the upcoming Saver's Match is, who is eligible, how it is calculated, and what taxpayers and plan sponsors need to do to prepare for the 2027 tax year.

The Transition: From Saver’s Credit to Saver’s Match

For taxable years beginning after December 31, 2026, section 6433 of the Internal Revenue Code allows certain low- and moderate-income individuals who make qualified retirement savings contributions to receive matching contributions of up to $1,000. These Saver's Match contributions are paid directly by the Secretary of the Treasury to an applicable retirement savings vehicle.

The most fundamental difference between the two programs is how the financial benefit is delivered and calculated:

• Saver’s Match contributions are amounts that are generally paid directly to an eligible individual’s applicable retirement savings vehicle, even if the individual has no income tax liability.

• In contrast, the legacy Saver’s Credit is a nonrefundable tax credit that cannot exceed the amount of an individual’s tax liability.

• Achieving a Better Life Experience (ABLE) account contributions may not be taken into account for Saver’s Match contributions, but they may continue to be taken into account for the Saver’s Credit after December 31, 2026.

• There are also structural differences in the income thresholds required for eligibility, how income changes affect the benefit amounts, and other income calculation differences.

• Saver's Match contributions are not includible in gross income when contributed to the vehicle, but subsequent distributions attributable to the match are subject to income tax unless rolled over or transferred through a trustee-to-trustee transfer.

The match is equal to up to 50 percent of the first $2,000 of qualified retirement savings contributions made by an eligible individual during the taxable year. Qualified retirement savings contributions include contributions to a traditional or Roth IRA, elective deferrals under section 402(g)(3) (such as 401(k), 403(b), or governmental 457(b) plans), voluntary after-tax employee contributions to a qualified retirement plan described in section 4974(c), and contributions to a section 501(c)(18) plan.

Eligibility, MAGI, and the Testing Period

Eligibility for the Saver's Match is strictly defined by the Code. An eligible individual is generally someone who is at least age 18 before the end of the taxable year for which the individual makes qualified retirement savings contributions. However, an eligible individual does not include an individual who is a student under section 152(f)(2) for the taxable year, an individual claimed as a dependent on another taxpayer’s tax return for the taxable year, or a nonresident alien who is not treated as a resident of the United States by reason of an election under section 6013(g) or (h).

To determine if you fall within the income limits, you must calculate your Modified Adjusted Gross Income (MAGI). MAGI for a taxable year equals the sum of your adjusted gross income, pre-tax elective deferrals and other salary reduction contributions to retirement plans, deductible contributions to traditional IRAs, and certain excluded foreign or territorial source income. For individuals whose filing status is married filing jointly, eligibility is determined independently for each spouse, but income is determined as the combined MAGI of both spouses for purposes of applying the income eligibility and phaseout rules.

The Saver's Match applicable percentage starts at a maximum of 50 percent. This percentage is reduced over a phaseout range as an eligible individual’s MAGI approaches the maximum limit. After the percentage point reduction is calculated, it is rounded down to the next lowest whole percentage point and subtracted from 50%.

For example, if Taxpayer A is a single filer who makes a $1,500 contribution to a traditional IRA in 2027 and has a MAGI of $30,000, their match percentage point reduction is 50 multiplied by (($30,000 - $20,500) ÷ $15,000), equaling 31.6667. Rounding down gives 31, leaving a 19% applicable percentage (50% - 31%). Taxpayer A's match would be $285.

Crucially, the amount of qualified retirement savings contributions is reduced by the amount distributed to the eligible individual or their spouse during a specified "testing period". The testing period includes the taxable year for which the contributions were made, the period after the end of that taxable year up to the tax return due date (with extensions), and the two preceding taxable years. Certain distributions are not taken into account for this reduction, such as trustee-to-trustee transfers, direct or indirect rollovers under section 408(d)(3) or 408A(d)(3), and plan loans treated as distributions under section 72(p).

Directing and Delivering the Federal Match

Applicable retirement savings vehicles permitted to receive direct Treasury Department Saver’s Match contributions include the non-Roth portion of governmental section 457(b) plans, qualified 401(k) cash or deferred arrangements, 403(b) annuity contracts purchased under a salary reduction agreement, and individual retirement plans that are not Roth IRAs. The vehicle must be for the benefit of the eligible individual, accept Saver’s Match contributions, and be designated by the individual.

• Traditional IRAs: An eligible individual must provide an IRA tracking number on their Form 8880-A. This number identifies a registered traditional IRA provider and allows the Treasury Department to pay the contribution directly to the chosen traditional IRA.

• Roth IRAs: The Treasury Department will not make the contribution directly to a Roth IRA. Instead, the Treasury Department would establish a conduit traditional IRA for the individual, followed by an immediate trustee-to-trustee transfer from the conduit IRA to the eligible individual’s chosen Roth IRA. This transfer acts as a Roth IRA conversion subject to federal income tax and withholding rules.

• Employer Plans: The IRS is considering at least three paths for a Saver’s Match contribution to be directed to an eligible individual’s chosen retirement plan. The Registration Path would allow retirement plans to register directly with the Treasury and IRS to facilitate payment via a conduit IRA. The Automatic Match Path would allow retirement plans to provide plan-level and participant-level information to automatically match the eligible individual and plan. The Rollover Path would allow the individual to initiate a rollover of the match from a conduit IRA to a chosen retirement plan using an IRS-provided Saver's Match Confirmation Number.

Notably, if an eligible individual’s calculated Saver’s Match contribution is greater than zero but less than $100 for a taxable year, they may elect for the amount to be treated as a refundable income tax credit rather than having it paid to a retirement savings vehicle.

IRS Guidance, TrumpIRA, and Administrative Rules

To claim the match, an eligible individual will need to file an income tax return for the taxable year and claim the match on a separate, newly developed Form 8880-A. To support this new initiative and increase public awareness, President Trump issued Executive Order No. 14403, which directs the Secretary to establish TrumpIRA.gov by January 1, 2027.

• The website is intended to provide information about high-quality, low-cost IRAs, particularly for independent contractors, self-employed individuals, and workers without access to employer-sponsored plans.

• It is anticipated that TrumpIRA.gov will list financial institutions that offer IRAs, accept Saver’s Match contributions, and explain applicable cost and quality criteria, allowing individuals to filter and select IRAs.

The IRS has also detailed rules for erroneous payments and early withdrawals. An erroneous contribution is treated as an underpayment of tax for the taxable year the determination is made. If the erroneous contribution is distributed from the retirement plan or IRA not later than the day prescribed by law for filing the return for the taxable year of the determination, the distribution is not treated as taxable and is not subject to the 10 percent additional tax on early distributions under section 72(t)(1). Additionally, a Saver’s Match recovery tax applies if a specified early distribution is made from the vehicle and the aggregate contributions exceed the account balance at the end of the year.

Retirement plans are not required to accept Saver’s Match contributions directly from the Treasury Department. However, those that choose to do so must be amended. Furthermore, special reporting obligations apply: a form in the Form 5500 series filed with respect to a retirement plan that receives these contributions must include the aggregate amount of Saver's Match contributions received directly from the Treasury Department for all eligible individuals during the plan year. Similarly, for IRAs, Form 5498 must include the aggregate amount of Saver's Match contributions received directly from the Treasury Department during the calendar year. Saver's Match contributions are generally treated as elective deferrals but are disregarded for nondiscrimination testing under section 401(a)(4), the actual deferral percentage (ADP) test for 401(k) plans, and the top-heavy test under section 416. Finally, they are not treated as amounts that may be paid or distributed to an eligible individual on account of hardship or an unforeseeable emergency.

The transition to the Saver's Match program represents a powerful federal incentive for American workers striving to build a secure financial future. By understanding the MAGI thresholds, the impact of taking early distributions, and the mechanics of directing the match to the right retirement accounts, you will be well-equipped to maximize this benefit. Keep following ScholarTax for more updates as final regulations are published!

This content is for educational and informational purposes only and should not be considered tax, legal, or financial advice. Tax laws and IRS guidance can change, and your situation may require personalized review by a qualified tax professional.