The bill requires every employer to either make a retirement program available that the Secretary of Labor finds comparable to the Federal Employees Retirement System (FERS) or to enroll their employees in FERS. It also gives self‑employed individuals the same choice and amends Title 5 to extend FERS eligibility, payroll withholding, and Thrift Savings Plan (TSP) treatment to non‑federal participants.
To soften the burden the bill builds phased contribution reductions for small employers and lower‑income self‑employed people, but it pairs those reductions with an option to forego them in exchange for a new Internal Revenue Code credit. Separate tax penalties and an anti‑retaliation provision enforce employer compliance.
The result is a federal effort to standardize retirement access that will create major payroll, plan‑design, and administrative changes for employers, tax professionals, and retirement plan vendors.
At a Glance
What It Does
The Act compels each employer to offer either a Secretary‑approved ‘covered retirement program’ or to notify the Department of Labor that employees will participate in FERS; self‑employed persons face the same choice. It amends chapter 84 of title 5 to bring non‑Federal employees and the self‑employed into FERS and TSP mechanics and creates an IRC credit (new sec. 36A) and a new excise tax (sec. 4980J) for enforcement.
Who It Affects
All U.S. employers and the self‑employed, payroll and HR teams responsible for withholding and reporting, retirement plan providers that will need to certify comparability, and federal agencies (Labor, OPM, Treasury) tasked with rulemaking and administration.
Why It Matters
This is a structural shift: it creates a legal pathway for widespread participation in a federal retirement program and sets new federal minimum obligations for retirement coverage. The bill changes funding flows into the TSP, creates a market for ‘FERS‑comparable’ private plans, and uses tax policy to steer employer decisions.
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What This Bill Actually Does
At its core the bill does two things: (1) it forces every employer (and gives every self‑employed person) to choose between offering a retirement program that the Secretary of Labor determines is comparable to FERS or enrolling the workforce in FERS; and (2) it rewrites dozens of Title 5 provisions so that non‑federal service can be creditable under the FERS framework and non‑federal participants interact with the Thrift Savings Plan like federal employees.
The bill establishes how the choice works in practice. Employers must either adopt a Secretary‑approved covered retirement program or notify the Secretary that their employees will participate in FERS; the Secretary and the Director of the Office of Personnel Management set the minimum frequency of a subsequent election (not less than annually).
For self‑employed individuals the same enrollment or notification obligation applies, and the Secretary sets contribution timing for self‑employed TSP deposits.On money: employee withholding and employer contributions are tied to the same percentages used in FERS but the bill builds a phased relief mechanism. A baseline 50 percent reduction in employer (or self‑employed) required contributions applies for the smallest taxpayers, with the reduction phased upward based on employer annual revenue or self‑employed income using explicit formulas (thresholds at $25M/$100M for employers and $75K/$125K for self‑employed).
Employers and self‑employed individuals may elect to waive those reductions; doing so opens them to a new tax credit under Internal Revenue Code sec. 36A, which is treated as part of the general business credit. Treasury, in consultation with the TSP executive director, will credit the reduced amounts to the Thrift Savings Fund so participant accounts do not lose the intended contributions.Enforcement is mainly tax‑based: a new excise tax (sec. 4980J) imposes $10 per day per affected employee for failures to provide a covered program or required contributions (inflation‑adjusted after 2026), with an overall cap for reasonable‑cause, non‑willful failures and a waiver authority for excessive penalties.
The bill also bars employers from reducing other forms of compensation to offset compliance. Finally, the bill tasks multiple federal agencies — Labor, OPM, and Treasury — with rulemaking to implement definitions, contribution procedures for the self‑employed, calculations for phased reductions, and coordination on TSP crediting.
The Five Things You Need to Know
Every employer must either offer a Secretary‑approved ‘covered retirement program’ or notify the Secretary that employees will participate in FERS; self‑employed individuals face the same binary choice.
The bill amends chapter 84 of title 5 to treat covered non‑Federal employees and covered self‑employed individuals as FERS‑eligible and to integrate their contributions and service as creditable for annuities and TSP treatment.
Required employer/self‑employed contributions initially mirror FERS percentages, but the bill provides a default 50% reduction for the smallest employers and self‑employed taxpayers and phases the relief for larger employers/incomes by explicit revenue and income formulas.
New Internal Revenue Code section 36A creates a contribution tax credit for employers and self‑employed individuals who elect not to take the statutory contribution reduction; the credit can be treated as part of the general business credit.
The bill adds IRC section 4980J: a $10‑per‑day, per‑employee excise tax for failures to provide required coverage or contributions (inflation‑adjusted), with a $500,000 cap for reasonable‑cause non‑willful failures and discretionary waiver authority.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Short title
Names the measure the 'Pensions for All Act.' This is purely formal but signals the bill’s intent to create universal retirement coverage.
Definitions and covered retirement program standard
Establishes key terms: 'covered retirement program' (any non‑FERS plan the Secretary deems comparable to FERS), 'covered non‑Federal employer/employee', and 'covered self‑employed individual.' The comparability standard is central because it determines which private plans qualify as lawful alternatives to enrolling in FERS — and it vests substantial substantive authority in the Secretary of Labor to set that bar by regulation.
Employer and self‑employed coverage choice and election mechanics
Imposes the core mandate: employers must either provide a covered retirement program to each employee or notify the Secretary that employees will participate in FERS. Self‑employed individuals must enroll in a covered retirement program or notify the Secretary of FERS participation. The section also requires periodic re‑election at intervals set by the Secretary and OPM (not less than annually), which creates recurring administrative work for payroll and plan teams.
Amendments to Title 5 to extend FERS/TSP mechanics to non‑federal participants
Makes detailed statutory changes across chapter 84 to recognize covered non‑Federal service as creditable service, extend withholding and employer contribution rules, allow self‑employed deposits to the Thrift Savings Fund, treat certain employer transfers as TSP separations, and align annuity, disability, survivor, and reemployment provisions with the expanded participant pool. Operationally this integrates non‑federal contributors into FERS actuarial and recordkeeping systems and requires OPM, Labor, and Treasury to design contribution flows and account treatment for new participant types.
Tax credit for employers and self‑employed who waive contribution reductions (new IRC sec. 36A)
Creates a refundable (or allowed) credit equal to an 'applicable percentage' of qualified pension contributions. The base applicable percentage is 50% and it phases downward with employer revenue or self‑employed income using concrete formulas (employer thresholds: $25M and $100M; self‑employed thresholds: $75K and $125K). The bill ties eligibility for the credit to electing not to take the statutory contribution reductions, and it treats the employer portion of the credit as part of the general business credit for coordination with other credits and limitations.
Failure penalty and collection (new IRC sec. 4980J)
Establishes a daily excise tax of $10 per affected employee or self‑employed individual for failing to provide required coverage or make required contributions, with an inflation adjustment after 2026. The tax period ends when the failure is corrected or (for employers) three months after the employee’s last date of employment. Reasonable‑cause exceptions, an overall cap of $500,000 for non‑willful failures, and waiver authority are included; the section also makes employers jointly and severally liable where group employer rules apply.
Prohibition on reducing compensation to offset compliance costs
Prevents employers from cutting any form of compensation provided to employees on or before enactment as a direct offset to the new retirement coverage requirement. This anti‑offset rule protects take‑home pay in the short term but does not address longer run compensation tradeoffs employers may make.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Non‑federal employees who currently lack employer retirement coverage — they gain access to either a private plan judged FERS‑comparable or direct participation in FERS with TSP access, providing a federal parity option.
- Self‑employed individuals without employer plans — the bill creates a clear path to participate in a FERS‑style regime and to deposit to the Thrift Savings Fund under Treasury procedures.
- Workers at small employers — statutory contribution relief and the IRC 36A credit mechanics lower near‑term employer cost exposure, increasing the likelihood small firms will offer compliant coverage.
- Retirement plan providers that can design and certify 'FERS‑comparable' plans — these firms have a new market for compliant private plans and advisory services around comparability and elections.
Who Bears the Cost
- Employers (especially mid‑sized and larger firms) — they face new employer contribution obligations, payroll withholding setup, compliance documentation, and potential joint liability under the new excise tax.
- Self‑employed individuals with higher incomes — the phased relief reduces at higher income levels, so higher‑earning independent contractors could see increased effective retirement outlays or administrative burdens to deposit to TSP.
- Payroll, HR, and benefits administrators — implementation will require new systems for withholding, contributions to TSP or covered plans, annual election processing, and reporting to Labor/OPM/Treasury.
- Federal agencies (Labor, OPM, Treasury) — the bill places rulemaking, calculation, and fund‑crediting duties on them without specifying appropriations; operationalizing contribution flows and comparability determinations is resource‑intensive.
Key Issues
The Core Tension
The central dilemma: expand universal, secure retirement coverage by tethering the private workforce to a federal retirement model (FERS/TSP) and you increase retirement access and standardization — but you also impose new recurring employer costs, significant administrative burdens, and fiscal and operational risks on the federal retirement infrastructure; the bill trades universality and a common standard for flexibility, cost control, and market continuity.
The bill centralizes a federal standard of retirement adequacy by giving the Secretary of Labor authority to determine what private plans are 'comparable' to FERS. That comparability determination is both the linchpin for compliance and a likely source of litigation and administrative appeals — a narrow or demanding interpretation will push more employers to FERS participation, while a looser one will swamp the comparability review process and create uneven coverage outcomes.
On funding and actuarial mechanics, the measure folds new contributors into the FERS/TSP universe and instructs Treasury to credit the Thrift Savings Fund when employers take legislated contribution reductions. This raises complex actuarial and cash‑flow questions: who bears the long‑term investment and longevity risk for a rapidly expanded participant base, and how will TSP governance adapt?
The phased employer relief formulas, tied to firm revenue and individual income, create administrability challenges and invite gaming (e.g., revenue timing, classification of workers) while increasing compliance costs that may offset the intended relief for many employers.
Finally, the bill uses the tax code both to enforce compliance (the new excise tax) and to shape employer choices (the 36A credit for opting out of reductions). Both tools rely heavily on IRS collection and audit capacity; absent clear reporting standards the government and payors will face disputes over credit eligibility and penalty triggers.
The measure also sits awkwardly with ERISA, state public pension law, and collective bargaining — the statutory text does not resolve how negotiated public or multiemployer plans interface with the Secretary’s comparability determinations or with existing fiduciary regimes.
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