The First Round Of Saver’s Match Guidance Is Here

The Treasury Department and the IRS (“IRS”) issued Notice 2026-48 (the “Notice”) providing initial guidance on the new Saver’s Match created by section 103 of SECURE 2.0. Effective in 2027 (with the first match paid in 2028), the Saver’s Match largely replaces the Saver’s Tax Credit with a new matching contribution from the federal government for low-and moderate-income taxpayers that must be deposited directly into a retirement plan or IRA, which raises a host of complex issues.

The Notice clarifies a number of interpretative questions related to the Saver’s Match and, importantly, requests comments on options for delivering the match directly to plans and IRAs. The guidance is in Q&A format and provides some insight into the forthcoming proposed regulations. Some of the key points are summarized below.

General Rule: An individual who is at least age 18 before the end of the tax year and made “qualified retirement savings contributions” (described below) for that tax year is eligible for the Saver’s Match. The following individuals are not eligible:

• a student under Code section 152(f)(2),
• a dependent claimed on another’s tax return, or
• a nonresident alien.

Eligible Contributions: “Qualified retirement savings contributions” are contributions made by the end of the tax year (April 15 for prior year contributions to IRAs) to any of the following plans/IRAs:

• regular contributions to a traditional or Roth IRA,
• elective deferrals to a 401(k) plan (including a SIMPLE 401(k) plan), 403(b) plan, governmental 457(b) plan, SIMPLE IRA, or SEP,
• voluntary after-tax employee contributions to certain qualified retirement plans described in Code section 4974(c), and
• employee contributions to a section 501(c)(18) trust created before June 25, 1959.

Income Limits: An eligible individual must have a modified adjusted gross income (MAGI(sup)1(/sup)) under the maximum income limits below (indexed) for the tax year.

The maximum match equals 50% of an eligible individual’s qualified retirement savings contributions up to $2,000. The 50% is reduced by a specified formula over a phaseout range as an individual’s MAGI increases.

An eligible individual must file an income tax return and a separate Form 8880-A (pending), and the IRS will determine the Saver’s Match amount. If the amount is less than $100, the individual may elect to receive it as a refundable tax credit.

This threshold issue, how the federal government can route each taxpayer’s Saver’s Match to the retirement plan or IRA of their choice, has been a key implementation challenge since SECURE 2.0 was enacted. The Notice describes several options, including, for a plan, a registration path (using a conduit IRA and plan registration), an automatic match path (similar to auto-portability), and a rollover path (transaction-based, using a conduit IRA).

No. Plan sponsors and IRA providers are encouraged, but not required, to accept the Saver’s Match. Those that do should be aware of special reporting, tax rules, and distribution restrictions if receiving the payment directly. For retirement plans, an amendment is needed, which can be adopted by the end of the year in which a Saver’s Match is first accepted. Notably, the Notice provides cutback relief, letting a plan add or drop the feature freely.

The following types of plans (including ones sponsored by governments or churches) can directly accept the Saver’s Match:

• 401(k) plans,
• salary reduction 403(b) plans,
• governmental 457(b) plans,
• the Thrift Savings Plan, and
• an IRA (not a Roth IRA).

If a plan/IRA directly receives a Saver’s Match, then Form 5500 (Form 5498 for IRAs) reporting must include the aggregate contribution amount for the plan year. Any later distribution from that plan would be reported on Form 1099-R as a distribution of pre-tax contributions. No additional reporting on Form 1099-R is required, even though the distribution might be subject to the Saver’s Match recovery tax. In addition, special reporting and tax rules apply to erroneous Saver’s Match contributions, regardless of whether they were made directly or indirectly.

If a plan directly receives a Saver’s Match, it is generally treated as a participant’s pre-tax elective deferral to the plan. Notably, the Notice includes sample language for annual enrollment notices.

The Notice packs in a lot of complexity, with more details to come in the pending proposed regulations. Even so, it’s a meaningful step toward making the Saver’s Match workable for plan participants, plan sponsors, recordkeepers, and the federal government. Stay tuned!

Footnote

^{1. An individual’s MAGI is the individual’s adjusted gross income, plus pre-tax elective deferrals and other salary reduction contributions to retirement plans, plus deductible contributions to traditional IRAs, and certain non-taxable foreign source income. Note: if an individual’s filing status is married filing jointly, eligibility is determined independently for the individual and the spouse, but a combined MAGI is used.}

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.