Military Spouse Retirement Plan Eligibility Credit for Small Employers

The SECURE 2.0 Act gives certain employers a general business tax credit for immediately including military spouses in their defined contribution plan. 

Credit Amount

  • Eligible employers may earn a $200 credit for each military spouse that participates in the plan.
  • Another credit (up to $300) applies to employer contributions (not elective deferrals) made to each military spouse.
  • The credit applies for the tax year in which the military spouse starts participating—and for the next two years.

Eligible Employers

  • Employers that had 100 or fewer employees who received at least $5,000 of compensation from the employer in the previous year are “eligible small employers.”
  • Employers with a defined contribution plan, including a 401(k) or 403(b) plan.

Because military families may move repeatedly throughout a servicemember’s career, spouses may have to wait to become eligible to participate in a plan at each new location. This can cut into long-term retirement savings. To help level the playing field for military spouses, employers may choose to take advantage of this new credit available under SECURE 2.0.

Military Spouses

  • The eligible employee must be married to a member of the uniformed services who is serving on active duty.
  • The employer may rely on the employee’s certification that the spouse is a servicemember (such certification must include the spouse’s name, rank, and service branch).
  • Individuals that are “highly compensated employees” are not considered eligible military spouses. (This includes employees who earn more than $150,000 in 2023, along with certain owners.)

Other Requirements

  • Military spouses must be eligible to participate in the plan within two months after their start date with the employer.
  • Once eligible, they are immediately eligible to receive at least the same amount of employer contributions that a similarly situated participant (who is not a military spouse) would be eligible to receive after two years of service.
  • All employer contributions to military spouses are 100% vested when made.

Employers using this credit should seek competent tax advice.

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