New Federal Retirement Plan Mandates Auto-Enrollment, Offers Government Match on Up to 5% of Income

The Retirement Savings for Americans Act of 2025 is trying to solve a huge problem: millions of workers don’t have a retirement plan at work. This bill creates the American Worker Retirement Plan—a brand-new federal savings account designed to catch everyone who falls through the cracks, from gig workers to employees at small businesses. It’s essentially a government-run Roth IRA with some serious matching funds, and it's modeled heavily on the successful Thrift Savings Plan (TSP) used by federal employees.

The Auto-Enrollment Hook: What It Means for Your Paycheck

If you’re a “Qualifying Worker”—meaning your employer doesn't offer a retirement plan or you aren't eligible for the one they do—your employer must automatically enroll you in this new plan (Sec. 104). This is a big shift. Unless you actively opt out, 3 percent of your paycheck will automatically start going into your account. Employers face tiered penalties of up to 10 percent of the unremitted funds if they fail to enroll you or send in your contributions promptly (Sec. 104(e)). For employers, this is a new mandatory administrative duty with real financial teeth if they mess up the paperwork.

Free Money? Breaking Down the Government Match Tax Credit

Here’s the part that should get your attention: the bill establishes a Government Match Tax Credit (Sec. 301) that isn't a deduction—it’s a refundable credit the Treasury deposits directly into your retirement account. The match is generous, covering 100 percent of your contributions up to 3 percent of your gross income, and 50 percent for contributions between 3 and 5 percent of your income. Plus, you get an additional 1 percent of your total gross income as a bonus credit. Crucially, the law specifies this credit money goes straight into your savings, not your bank account, and it’s not counted against the annual contribution limits (Sec. 105(d)). This is a huge incentive for lower and middle-income workers to save, effectively doubling their initial contributions.

The Catch: When the Match Money Disappears

While the match is great, there’s a serious clawback provision to watch out for. If you withdraw the contribution that generated the government match in less than six months, you forfeit the matching credit (Sec. 301(h)). For someone struggling financially who needs to access their savings early, this means the government match—the very thing designed to help them build wealth—is immediately taken back and returned to the Treasury. This rule is designed to prevent people from using the account as a short-term savings vehicle, but it penalizes those who face unexpected emergencies.

Your Savings Won't Kill Your Benefits

One of the most important consumer protections in this bill addresses a common fear: that saving money will disqualify you from public assistance. The bill clarifies that if you are under age 65, the money you save in this new account will not be counted when determining your eligibility for federal public assistance benefits (Sec. 4). This means someone can save for retirement without worrying that their diligence will cost them access to programs like Medicaid or SNAP if they need them.

Complex Rules for Accessing Your Cash

This account isn't a piggy bank. Like the TSP, it offers several ways to access funds, but they are tightly controlled. You can take out loans, but only up to the amount you personally contributed (Sec. 106(h)). You can also make voluntary distributions for financial hardship or if you are over age 59 1/2 (Sec. 106(i)). However, the bill introduces a unique and potentially frustrating rule: if your gross income exceeds a certain high-earner threshold (based on IRC Section 414(q)(1)(B)), you will be subject to a forced withdrawal of your contributions for that year (Sec. 106(j)). This means if you have a bumper year, the government will make you take your money out, potentially treating gains on that money as a taxable early distribution.

Administration and Oversight: A New Government Agency

Managing this massive new pool of money is the American Worker Retirement Investment Board, a new five-member body that will operate within the Executive Branch (Sec. 201). This Board sets investment policies, hires the Executive Director, and manages the funds, which must offer a mix of options including stock indexes, fixed-income, and age-appropriate life-cycle funds (Sec. 102). The bill establishes strict fiduciary duties for everyone involved in managing the money, borrowing heavily from existing labor law (ERISA) to ensure they act solely in the best interest of participants (Sec. 206). The Executive Director is also granted broad subpoena authority to demand documents and records (Sec. 210), giving the agency significant power to investigate compliance and potential breaches.