The 'Pensions for All Act' Mandates FERS-Like Retirement for Every Worker—Or Face a $10 Daily Penalty

The new Pensions for All Act aims to fundamentally reshape retirement savings in the U.S. by mandating that nearly every employer and self-employed individual must provide a retirement plan that is either equivalent to the Federal Employees Retirement System (FERS) or simply enroll their people into FERS itself. This is a massive shift, essentially extending the federal government’s defined retirement structure to the private sector and gig workers.

The Mandate: FERS or FERS-Equivalent

Starting with the basics (Sec. 3), if you run a business, you have two choices: either set up a "covered retirement program" (which the Secretary of Labor decides is comparable to FERS) or put all your employees into FERS. Self-employed people have the same choice for themselves. Think of it like this: your employer can no longer just offer a basic 401(k) and call it a day unless the Department of Labor says that 401(k) is truly comparable to the full FERS package. The law even sets up an annual window where employers can switch their entire workforce from their own plan to FERS, or vice-versa.

Opening the Federal Gates: Who Can Join FERS Now?

Section 4 is the heavy lift, creating a pathway for non-federal employees and the self-employed to join FERS and the Thrift Savings Plan (TSP). This means that a software developer working for a startup or a self-employed contractor could potentially build up FERS service credit just like a federal agency employee. For the self-employed, their "basic pay" for contribution calculations is defined as their annual self-employment income (Sec. 4). This move gives millions of workers access to a portable, defined retirement structure, which is a big win for retirement security.

The Cost Conundrum and the Small Business Break

Here’s where the policy gets complicated, especially for employers. If a covered non-Federal employer or a self-employed individual chooses FERS, they have to make the same contributions an agency would. However, the bill introduces a tiered reduction system to ease the burden on smaller operations. For example, if an employer’s annual revenue is $25 million or less, or if a self-employed person’s income is $75,000 or less, their required FERS and TSP contributions are cut in half (50%). There’s a sliding scale for those earning slightly more, up to $100 million in revenue or $125,000 in income, before they have to pay the full amount (Sec. 4). This aims to protect the small business owner from being crushed by the new mandate, but the formulas are complex and will require careful accounting.

The Carrot and the Stick: Tax Credits and Daily Penalties

The bill uses a classic carrot-and-stick approach to ensure compliance. The "carrot" is a new federal income tax credit (Sec. 5). Eligible taxpayers—especially those who choose not to take the contribution reductions—can claim a credit equal to 50% of their retirement contributions. This 50% rate phases out for employers with gross receipts over $25 million and for self-employed individuals with incomes over $75,000. Essentially, the government is offering to share the cost of the mandated retirement savings.

The "stick" is a serious one: a new daily penalty tax (Sec. 6). If an employer or self-employed person fails to provide the required retirement plan or make the necessary contributions, they get hit with a tax of $10 for every single day the failure continues for each affected employee or for the self-employed individual. That $10 penalty is also indexed for inflation starting in 2026. While there’s a $500,000 cap for honest mistakes and a waiver for reasonable cause, a $10 daily penalty adds up fast. For a small business with 10 employees, that’s $100 a day, or $36,500 a year, just for non-compliance.

Protecting the Paycheck

Finally, the bill includes a crucial protection for current workers (Sec. 7). It explicitly prohibits employers from cutting an existing employee's pay, benefits, or any other compensation just because the employer now has to pay for the employee’s required retirement plan (FERS or otherwise). This provision is designed to ensure that the cost of retirement security doesn't simply get passed on to the worker in the form of a lower salary, protecting the take-home pay of millions of people already juggling tight budgets.