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Military Spouse Retirement Plan Eligibility Credit For Small Employers

Military spouses often do not remain employed long enough to become eligible for their employer’s retirement plan or to enjoy employer contributions to retirement accounts. 

To make it easier for these individuals to enjoy employment benefits, the federal government provides small employers -- small businesses with no more than 100 employees earning more than $5,000 per year -- with a tax credit with respect to their defined contribution plans if they:

  1. make military spouses immediately eligible for plan participation within two months of hire
  2. upon plan eligibility, make the military spouse eligible for any matching or nonelective contribution that they would have been eligible for otherwise at 2 years of service, and
  3. make the military spouse 100% immediately vested in all employer contributions.

The tax credit equals the sum of:

  1. $200 per military spouse, and
  2. 100% of all employer contributions (up to $300) made on behalf of the military spouse.

Results in a maximum tax credit of $500. This credit applies for 3 years with respect to each military spouse. It does not apply to highly compensated employees ($150,000 for 2023). An employer may rely on an employee’s certification that such employee’s spouse is a member of the uniformed services.

Effective Date: taxable years beginning after the date of enactment of this Act.

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