Senators Expand Retirement Benefits for Military Spouses in New Bill

The proposed legislation comes months after a Department of Defense report found that a quarter of military spouses are unemployed. 

Lawmakers have introduced a bill that would expand access for military spouses to employer-sponsored retirement plans.  

U.S. Senators Susan Collins, R-Maine; Maggie Hassan, D-New Hampshire; James Lankford, R-Oklahoma; and Michael Bennet, D-Colorado, have presented the Military Spouses Retirement Security Act, a bipartisan bill that would help spouses of active-duty service members save for retirement by increasing their access to employer-sponsored retirement plans.

Under the act, small employers—with 100 employees or fewer—would be eligible for a tax credit of up to $500 per year per military spouse. It would be available for three years per military spouse, and the credit amount would be equal to $200 per military spouse, plus 100% of all employer contributions for that spouse, up to $300.

To receive the credit, small employers must allow a military spouse to be immediately eligible for retirement plan participation within two months of hire. Upon plan eligibility, a military spouse “must be eligible for any matching or non-elective contribution available to a similarly situated employee with at least two years of service and must be 100% immediately vested in all employer contributions,” according to the bill.  

“Like many Americans, spouses of active-duty service members often face challenges when it comes to saving for retirement. Military spouses also face one hurdle that many others do not: frequent moves and changes in employment,” Collins says. “By encouraging small employers to provide military spouses with accelerated access to retirement plans, employer contributions and vesting, our bipartisan bill would help to strengthen the financial security of these unsung heroes of our country’s national defense.”

The coronavirus pandemic has exacerbated threats to retirement security, especially for families of active-duty service members. According to the Department of Defense, about one-third of military service members experience a permanent change of station move every year. When service members move, their spouses often relocate with them, putting their own careers on hold.  

Another DOD report found that a quarter of military spouses are unemployed—a rate roughly four times the national average of 6.3% in January. Military spouses faced other disadvantages prior to the pandemic as well—and many continue to be underemployed and earn less than they are qualified for, or earn nothing at all.

“Every assignment and deployment impacts a family, and too often, that can mean sacrificing access to retirement benefits,” Lankford says. “This legislation encourages businesses to make it easier for military spouses to participate in retirement plans and ease some of the burdens of moving every few years. This is a simple way we can honor their sacrifices, make their life of service easier and help prepare them for their retirement.”

The full text of the bill can be found here.