Saver's Match missing a crucial component

With 2026 nearly halfway over, it's worth reminding those of us in the retirement services industry that this is the final year before the Saver's Match, one of the key elements of the SECURE 2.0 Act of 2022, replaces the Saver's Credit as a benefit for eligible taxpayers. 

The Saver's Match has the potential to significantly increase retirement savings for qualified taxpayers. Morningstar research estimates that it could generate an additional $2.03 trillion for low-income Americans. According to our own simulation at Retirement Clearinghouse, we predict that every year, up to 27.1 million retirement-savers could benefit. 

The program involves a 50% federal matching contribution of up to $1,000 for qualified retirement savers or up to $2,000 for those filing taxes jointly, which will be deposited directly into the taxpayer's IRA or 401(k) plan savings account. 

When the Saver's Match goes into effect in 2027, the volume of direct deposits from the U.S. Treasury into 401(k) plans and IRAs will require technology infrastructure that can handle all of those transactions on a timely basis every year. Every transaction will require locating a taxpayer's retirement savings account, matching the identities of the taxpayer and accountholder, and transporting the contribution from the U.S. Treasury into the active account. 

Without the infrastructure in place to seamlessly, effectively and securely facilitate the millions of Saver's Match contributions, taxpayers won't be able to obtain the benefit they are qualified to receive.

In addition to lacking the necessary technological infrastructure to coordinate the money movement across the U.S. retirement system, the Saver's Match program also has another potential flaw. 

Taxpayers under age 59-and-a-half who make early non-hardship withdrawals from their Saver's Match contributions can be subject to a "recovery tax" mechanism that claws back any money that isn't repaid. The early withdrawal sum has to be repaid in its entirety within the tax year it is made. On top of that, the taxpayer is subject to a 10% penalty on withdrawals and loses out on the extra savings that distribution would have grown to had it remained invested in the U.S. retirement system. 

Qualified taxpayers who take early withdrawals can avoid the "recovery tax" by making extra contributions up to the limit of the distribution amount into the IRA or 401(k) account into which the Saver's Match contribution was deposited. 

The same infrastructure necessary for handling millions of contributions from the U.S. Treasury every year under the Saver's Match also will be required to handle all of the "recovery tax" claw-backs and the monitoring of contributions for paying back early withdrawals.

What recordkeepers and sponsors can do now

During the rest of 2026, the final tax year before the Saver's Match goes into effect, defined contribution plan recordkeepers and sponsors can take steps to help participants take advantage of the Saver's Match benefit.

Recordkeepers and sponsors must first determine whether they will participate in the Saver's Match program, which is a voluntary benefit. For plan sponsors, understanding eligibility rules and determining the percentage of their workforce that could qualify is a good first step in their due diligence. 

Once the decision has been made to accommodate the Saver's Match, plan sponsors can undertake initiatives to educate their plan participants about the Saver's Match as part of their commitment to financial wellness. It's important to educate participants on what the Saver's Match is, how to claim it if they meet eligibility requirements and how much of a matching contribution they can receive. 

Saver's Match educational campaigns also can focus on the consequences of early non-hardship withdrawals from the federal matching contribution and what participants can do to prevent a "recovery tax" claw-back.  

In the second half of the year, we in the retirement services industry can renew our efforts to prepare plans and eligible taxpaying participants for receiving Saver's Match contributions — and keep the matching federal contributions to which they are entitled.