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HB 8189

AN ACT RELATING TO TAXATION -- EMPLOYER TAX CREDITS FOR RETIREMENT PLAN ESTABLISHMENT, PARTICIPATION AND AUTO-ENROLLMENT

2026 Regular Session Introduced by Alex Finkelman

Rhode Island offers tax credits to small employers (up to 100 employees) to establish retirement plans and auto-enroll employees, aiming to boost retirement coverage.

04/16/2026 Committee recommended measure be held for further study
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WeVote Research Nonpartisan
Bill Summary · HB 8189

Summary: HB 8189 ( Rhode Island, 2026 ) – Employer Tax Credits for Retirement Plan Establishment, Participation, and Auto-Enrollment

Overview

  • Purpose: Establish Rhode Island income tax credits to encourage small employers to establish and maintain qualified retirement plans for employees, with incentives tied to employee participation and automatic enrollment features. Aligns state policy with federal SECURE Act principles to boost retirement coverage and savings among Rhode Island workers.
  • Status: Introduced February 27, 2026; referred to House Finance. As of available materials, the measure was recommended to be held for further study (April 16, 2026). Effective for taxable years beginning on or after January 1, 2027.

Key Provisions

1) Definitions and Scope

  • Eligible Employer: An employer with 1–100 employees who earned at least $5,000 in compensation in the preceding tax year, and that did not maintain a substantially similar qualified plan for those employees in the preceding three years (subject to federal law exceptions).
  • Eligible Employee: An employee of an eligible employer who participates in the plan during the taxable year through elective deferrals or on whose behalf employer contributions are made.
  • Qualified Retirement Plan: Any plan described in the Internal Revenue Code eligible for favorable federal tax treatment (e.g., 401(a), 401(k), 403(b), 408(k), 408(p)).
  • Automatic Enrollment Feature: An arrangement where eligible employees are automatically enrolled at a specified contribution rate unless they affirmatively opt out, consistent with the Internal Revenue Code.
  • Eligible Costs: Ordinary and necessary costs related to establishing or administering the plan, and employer contributions or matching contributions for eligible employees.

2) Retirement Plan Participation Credit

  • Credit Type: Nonrefundable Rhode Island income tax credit against tax liability for chapters 11, 14, 15, or 30 of Title 44.
  • Per-Employee Cap: Up to $100 credit per eligible employee per taxable year.
  • Employer Cap: Aggregate credit not to exceed $10,000 per taxable year per eligible employer.
  • Eligibility Requirement: Credit only for employees who participate in the plan during the taxable year.
  • Interaction with Minimum Tax: Credit cannot reduce tax liability below the applicable minimum tax.

3) Auto-Enrollmen t Enhancement Credit

  • Additional Credit: An extra nonrefundable credit for employers that implement automatic enrollment.
  • Per-Employee Basis: Calculated for each eligible employee subject to automatic enrollment.
  • Per-Employee Cap: Up to $100 per eligible employee per taxable year.
  • Aggregate Cap: Up to $1,000 per eligible employer per taxable year.
  • Duration: Credit may be claimed for up to three consecutive taxable years beginning with the first year the automatic enrollment feature is implemented.
  • Compliance: Credit contingent on meeting the automatic enrollment requirements under the Internal Revenue Code.
  • Interaction with Minimum Tax: Credit cannot reduce tax liability below the applicable minimum tax.

4) Nondiscrimination and Coordination

  • Plan Non-Discrimination: Plans must be offered on a nondiscriminatory basis consistent with the Internal Revenue Code.
  • Double Benefit Limitation: No credit allowed for costs used to claim any other Rhode Island credit, deduction, or incentive.
  • Tax Chapter Election: If liable under multiple Rhode Island tax chapters (e.g., 14 and 15), the taxpayer elects the one through which the credit is applied, and it can be claimed under only one chapter for the year.

5) Pass-Through Entities

  • Treatment: For partnerships, LLCs, S corporations, etc., credits are passed through to owners, partners, or members in proportion to ownership.

6) Carryforward

  • Unused Credit: May be carried forward up to three consecutive taxable years, subject to regulations.

7) Federal Coordination and Reporting

  • Coordination with Federal Law: Interpret and administer in a manner consistent with the federal SECURE Act; federal law controls in case of conflict.
  • Annual Reporting: The tax administrator must report to the General Assembly annually on the number of taxpayers claiming the credit, total credits claimed, and other data necessary to assess fiscal and economic impact.

8) Regulations

  • Regulatory Authority: The tax administrator, with input from the Office of the General Treasurer, will promulgate rules necessary to implement and administer the chapter.

Effective Date

  • Tax years beginning on or after January 1, 2027.

Potential Impacts

  • Small Employers: Provides a financial incentive to establish and maintain retirement plans, potentially reducing the barrier to entry due to administrative costs and plan setup.
  • Employee Participation: Direct per-employee credits tied to participation may encourage higher enrollment and ongoing participation.
  • Auto-Enrollment: Additional incentives to adopt automatic enrollment, which generally increases participation rates in retirement plans.
  • State Revenue: As a nonrefundable credit against Rhode Island income tax, the program reduces state tax revenue on a per-credit basis; overall fiscal impact to be evaluated by annual reporting.
  • Compliance: Employers must ensure nondiscriminatory plan features and alignment with federal law to qualify; coordination with existing credits and tax rules is required.

Notable Details

  • Caps: $100 per eligible employee per year; $10,000 annual cap per eligible employer for participation credit; $1,000 annual cap per employer for auto-enrollment enhancement credit.
  • Duration: Auto-enrollment credit available for up to three consecutive years.
  • Coordination: Credits cannot stack with other Rhode Island credits for the same costs; rely on federal framework where applicable.
  • Reporting: Annual data collection to assess impact and effectiveness.

This bill seeks to modernize and expand retirement coverage in Rhode Island by leveraging targeted tax credits to encourage small employers to adopt and maintain retirement plans with auto-enrollment, while ensuring alignment with federal retirement policy.

Compiled from official sources — confirm details with the bill’s official record.

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