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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1557 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1557

 To amend the Internal Revenue Code of 1986 to expand personal savings 
 and retirement savings coverage by allowing employees not covered by 
  qualified retirement plans to save for retirement through automatic 
                     IRAs, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 14, 2011

Mr. Bingaman (for himself and Mr. Kerry) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
 To amend the Internal Revenue Code of 1986 to expand personal savings 
 and retirement savings coverage by allowing employees not covered by 
  qualified retirement plans to save for retirement through automatic 
                     IRAs, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Automatic IRA Act of 2011''.

SEC. 2. EMPLOYEES NOT COVERED BY QUALIFIED RETIREMENT PLANS OR 
              ARRANGEMENTS ENTITLED TO PARTICIPATE IN AUTOMATIC IRA 
              ARRANGEMENTS.

    (a) In General.--Subchapter D of chapter 1 of the Internal Revenue 
Code of 1986 (relating to pension, profit-sharing, stock bonus plans, 
etc.) is amended by inserting at the end the following new part:

                 ``PART IV--AUTOMATIC IRA ARRANGEMENTS

``Sec. 438. Right to automatic IRA arrangements at work.
``Sec. 439. Automatic IRAs.
``Sec. 440. Rules relating to choice of IRA providers.

``SEC. 438. RIGHT TO AUTOMATIC IRA ARRANGEMENTS AT WORK.

    ``(a) Requirement To Provide Automatic IRA Arrangement.--If an 
applicable employer does not maintain a qualified plan or arrangement 
(as defined in subsection (i)) for any calendar year, the employer 
shall make available an automatic IRA arrangement which meets the 
requirements of this section to each qualifying employee of the 
employer for the calendar year.
    ``(b) Qualifying Employee Defined.--For purposes of this section--
            ``(1) In general.--The term `qualifying employee' means any 
        employee of the employer other than an excludable employee.
            ``(2) Excludable employee.--The term `excludable employee' 
        means any employee who is in one of the following categories of 
        employees that the employer elects to exclude from treatment as 
        qualifying employees:
                    ``(A) Employees described in section 410(b)(3),
                    ``(B) Employees who have not attained the age of 18 
                before the beginning of the calendar year, or
                    ``(C) Employees who have not completed at least 3 
                months of service with the employer,
            ``(3) Exception for employees of governments and 
        churches.--The term `qualifying employee' shall not include an 
        employee of--
                    ``(A) a government or entity described in section 
                414(d), or
                    ``(B) a church or a convention or association of 
                churches which is exempt from tax under section 501, 
                including any employee described in section 
                414(e)(3)(B).
            ``(4) Plan sponsor's employees.--
                    ``(A) In general.--If--
                            ``(i) an employer maintains 1 or more 
                        qualified plans or arrangements, and
                            ``(ii) the employees of a subsidiary, 
                        division, or other major business unit of the 
                        employer are not generally eligible to 
                        participate in any such qualified plan or 
                        arrangement,
                then, except as provided in subparagraph (B), the 
                employer shall make available an automatic IRA 
                arrangement which meets the requirements of this 
                section to all qualifying employees described in clause 
                (ii) for the calendar year.
                    ``(B) Exception for certain employees.--An employer 
                may exclude from coverage under the automatic IRA 
                arrangement under subparagraph (A)--
                            ``(i) any employee not eligible to 
                        participate in any qualified plan or 
                        arrangement solely because the employee has not 
                        satisfied the minimum age and service 
                        requirements for participation in the plan or 
                        arrangement,
                            ``(ii) in the case of an employer which 
                        maintains a qualified plan or arrangement which 
                        consists of a section 403(b) annuity contract 
                        (including a custodial account), an arrangement 
                        described in section 408(p), or a simplified 
                        employee pension described in section 408(k), 
                        any employee who is permitted to be excluded 
                        from, or who is not required to be eligible to 
                        participate in, any such plan, arrangement, or 
                        pension under section 403(b)(12), 408(p)(4), or 
                        408(k)(2), whichever is applicable.
            ``(5) Designation of qualifying employees.--The Secretary 
        shall issue guidelines for determining the class or classes of 
        qualifying employees to be covered by an automatic IRA 
        arrangement. Such guidelines shall permit employers to 
        designate under paragraph (2) the classification or categories 
        of employees who are not eligible for the arrangement.
            ``(6) Employee includes self-employed.--For purposes of 
        this part, an employer described in section 401(c)(4) may elect 
        to treat self-employed individuals (within the meaning of 
        section 401(c)(1)) as employees of the trade or business, 
        except that if the employer has employees other than such 
        individuals, the employer may only make the election under this 
        paragraph if the employer makes available an automatic IRA 
        arrangement to such other employees in accordance with the 
        rules of subsection (a) and paragraph (4).
    ``(c) Automatic IRA Arrangement.--For purposes of this section, the 
term `automatic IRA arrangement' means an arrangement of an employer--
            ``(1) under which, in accordance with subsection (d)--
                    ``(A) a qualifying employee may elect to have an 
                amount contributed to a designated automatic IRA 
                established on behalf of the employee instead of having 
                that amount paid to the employee directly in cash,
                    ``(B) a qualifying employee is treated as having 
                elected such contributions in the amount specified in 
                subsection (d)(2) until the employee specifically 
                elects not to have such contributions made (or 
                specifically elects to have such contributions made at 
                a different percentage or in a different amount), and
                    ``(C) the contributions are invested as provided in 
                subsection (d)(3),
            ``(2) under which payments are to be made to the designated 
        automatic IRA of each qualifying employee by having the 
        employer of the employee--
                    ``(A) make periodic direct deposit or other payroll 
                deposit payments (including electronic payments) to the 
                plan by payroll deduction, or
                    ``(B) in the case of employees not paid through 
                regular periodic payments, make such deposit or 
                payments in such manner as the Secretary may provide in 
                guidance, including through available automatic debit 
                or similar arrangements or the use of authorized 
                intermediary entities such as business, professional, 
                or trade associations,
            ``(3) under which the payments described in paragraph (1) 
        are to be made by the employer on or before--
                    ``(A) the last day of the month following the month 
                in which the compensation would otherwise have been 
                payable to the employee in cash, or
                    ``(B) such later date as the Secretary may 
                prescribe, except that the Secretary may not prescribe 
                a date later than the due date for the deposit of tax 
                required to be deducted and withheld under chapter 24 
                (relating to collection of income tax at source on 
                wages) for the payroll period to which such payments 
                relate, and
            ``(4) which meets the notice and election requirements of 
        subsection (e).
    ``(d) Definitions and Rules Relating to Automatic Enrollment 
Requirements.--For purposes of this section--
            ``(1) Designated automatic ira.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `designated automatic IRA' 
                means, with respect to any automatic IRA arrangement of 
                an employer, an automatic IRA of a provider designated 
                by, or on behalf of, the employer under subsection (g).
                    ``(B) IRA specified by employee.--An employer may 
                also elect to allow each of its qualifying employees to 
                designate an individual retirement plan (whether or not 
                an automatic IRA) established by or on behalf of the 
                employee as the designated automatic IRA with respect 
                to that employee.
                    ``(C) Special rules.--
                            ``(i) Notice requirement.--If contributions 
                        are made to designated automatic IRAs that are 
                        designated by the employer in accordance with 
                        subparagraph (A), the employer shall provide 
                        each participating employee a standard written 
                        notice, as provided by the Secretary, that the 
                        employee's balance may be periodically 
                        transferred without cost or penalty from the 
                        designated automatic IRA to another individual 
                        retirement plan, or to a retirement bond 
                        described in section 440(d), established by or 
                        on behalf of the employee.
                            ``(ii) Treatment of periodic transfers.--
                        For tax treatment of transfers described in 
                        clause (i), see subsection (f)(3).
                    ``(D) Contributions to designated automatic iras.--
                An employer shall not be treated as failing to satisfy 
                the requirements of this section or any other provision 
                of this title merely because the employer makes all 
                contributions (or all contributions on behalf of 
                qualifying employees who do not specify a designated 
                automatic IRA under subparagraph (B)) to a designated 
                automatic IRA or to a retirement bond described in 
                section 440(d) and held on behalf of the employee.
            ``(2) Amount of contributions.--
                    ``(A) In general.--The amount specified in this 
                paragraph is--
                            ``(i) 3 percent of compensation, or
                            ``(ii) such other percentage of 
                        compensation as is specified in regulations 
                        prescribed by the Secretary which is not less 
                        than 2 percent or more than 4 percent.
                    ``(B) Authority of secretary to provide for 
                periodic increases.--In the case of qualifying 
                employees under an automatic IRA arrangement for 2 or 
                more consecutive years, the Secretary may by regulation 
                provide for periodic (not more frequent than annual) 
                increases in the percentage of compensation an employee 
                is deemed to have elected under subparagraph (A).
                    ``(C) Permitted additional procedures to limit 
                contributions.--An employer--
                            ``(i) shall have no responsibility for any 
                        calendar year for determining whether, or 
                        ensuring that, the contributions with respect 
                        to any employee do not exceed the deductible 
                        amount in effect for taxable years beginning in 
                        the calendar year under section 219(b)(5) 
                        (determined without regard to subparagraph (B) 
                        thereof), and
                            ``(ii) shall not be treated as failing to 
                        satisfy the requirements of this section or any 
                        other provision of this title merely because 
                        the employer chooses to limit the contributions 
                        under this subsection on behalf of a qualifying 
                        employee for any calendar year in a manner 
                        reasonably designed to avoid exceeding such 
                        deductible amount.
            ``(3) Investment of assets in automatic iras.--
                    ``(A) Investment in specified options.--Amounts 
                contributed under this subsection for a calendar year 
                shall, unless otherwise directed by the qualifying 
                employee, be invested in--
                            ``(i) the principal preservation investment 
                        option of the designated automatic IRA 
                        described in section 439(c)(2)(A) if, as of the 
                        close of the preceding calendar year or at such 
                        other time as may be prescribed by the 
                        Secretary, the outstanding balance of such plan 
                        was less than the amount described in paragraph 
                        (2)(C)(i), and
                            ``(ii) if clause (i) does not apply, the 
                        blended investment option of the designated 
                        automatic IRA described in section 
                        439(c)(2)(B),
                except that the Secretary may provide by regulation or 
                other guidance that, in the case of a designated 
                automatic IRA to which clause (ii) applies, amounts 
                previously invested in the principal preservation 
                option shall be reinvested in the blended investment 
                option.
                    ``(B) Type of automatic ira.--A qualifying employee 
                for whom a designated automatic IRA is established 
                under paragraph (1)(A) may elect, at such time and in 
                such manner and form as the Secretary may prescribe, 
                whether to treat the plan as described, or not 
                described, in section 408A. If no such election is 
                made, the plan shall be treated as described in section 
                408A.
            ``(4) Alternative automatic enrollment procedure.--An 
        arrangement shall not be treated as failing to meet the 
        automatic enrollment requirements under subsection (c)(1)(B) 
        merely because the employer, in accordance with guidance 
        prescribed by the Secretary, elects to provide employees with 
        communications informing the employees that the employer wishes 
        to obtain from each employee an affirmative election either to 
        contribute (including specification by the employee of the 
        information necessary to permit the election to be implemented) 
        or not to contribute to an automatic IRA, except that such 
        employer shall treat any employee who fails to make such an 
        election in the manner provided under subsection (c)(1)(B).
    ``(e) Election and Notice Requirements.--
            ``(1) Election requirements.--Each automatic IRA 
        arrangement shall permit--
                    ``(A) each qualifying employee to elect, during the 
                60-day period or other period specified by the 
                Secretary before the beginning of any calendar year 
                (and during the 60-day period or other period specified 
                by the Secretary before the first day the employee is 
                eligible to participate), to participate in the 
                arrangement, or to modify the employee's election under 
                the arrangement (including the amounts subject to the 
                arrangement and the manner in which such amounts are 
                invested), for such year, and
                    ``(B) subject to a requirement for reasonable 
                notice, an employee to elect to terminate participation 
                in the arrangement at any time during a calendar year, 
                except that if an employee so terminates, the employer 
                may provide that the employee may not resume 
                participation until the beginning of the next calendar 
                year.
            ``(2) Employer notice.--Under an automatic IRA arrangement, 
        the employer shall provide, within a reasonable period before 
        the beginning of each period described in paragraph (1)(A), a 
        notice to each qualifying employee meeting the requirements of 
        section 414(w)(4).
            ``(3) Model notice, forms, and website.--The Secretary, in 
        consultation with the Secretary of Labor, shall--
                    ``(A) provide a model notice, written in a manner 
                calculated to be understandable to the average worker, 
                that is simple for employers to use, that meets the 
                requirements of paragraph (2), and that informs 
                qualifying employees of the automatic enrollment 
                arrangement (including the types of individual 
                retirement plans to which contributions may be 
                deposited),
                    ``(B) provide model forms for enrollment, including 
                automatic enrollment, in an automatic IRA arrangement, 
                and
                    ``(C) establish an Internet website under section 
                440 that allows employers and individuals to obtain 
                information on automatic IRA arrangements and on saving 
                and investing for retirement, and to obtain required 
                notices and forms.
            ``(4) Coordination with withholding.--The Secretary shall 
        modify the withholding exemption certificate under section 
        3402(f) so that, in the case of any qualifying employee covered 
        under an automatic IRA arrangement, any notice and election 
        requirements with respect to the arrangement may be met through 
        the use of an attachment to such certificate or other 
        modifications of the withholding exemption procedures.
    ``(f) Automatic IRA Contributions Treated Like Other Contributions 
to Individual Retirement Plans.--
            ``(1) Tax treatment unaffected.--The fact that a 
        contribution to an individual retirement plan is made on behalf 
        of a qualifying employee under an automatic IRA arrangement 
        instead of being made directly by the employee shall not affect 
        the deductibility or other tax treatment of the contribution or 
        of other amounts under this title.
            ``(2) Payroll savings contributions taken into account.--
        Any contribution made on behalf of a qualifying employee under 
        an automatic IRA arrangement shall be taken into account in 
        applying the limitations on contributions to individual 
        retirement plans and the other provisions of this title 
        applicable to individual retirement plans as if the 
        contribution had been made directly by the employee.
            ``(3) Rollover limit not to apply.--For purposes of section 
        408(d)(3)(B), there shall be disregarded any qualified rollover 
        contribution which is a transfer described in subsection 
        (d)(1)(C)(i).
    ``(g) Designation of Provider for Employer's Automatic IRA 
Arrangement.--
            ``(1) In general.--For purposes of subsection (d)(1)(A), 
        the provider of an automatic IRA under any automatic IRA 
        arrangement of an employer shall be the trustee or issuer of 
        the individual retirement plan and shall be determined under 
        one of the following methods:
                    ``(A) Provider designated by employer.--
                            ``(i) In general.--An employer may 
                        designate a single provider for the automatic 
                        IRA arrangement.
                            ``(ii) Exemption from erisa.--If the 
                        provider designated by the employer is included 
                        on the list of providers contained in the 
                        website established under section 440(b), see 
                        the exemption under section 3(2)(C) of the 
                        Employee Retirement Income Security Act of 1974 
                        of the arrangement from such Act.
                    ``(B) Election to use default provider.--An 
                employer may elect to have the provider selected on the 
                employer's behalf under the procedures established 
                under section 440(c).
                    ``(C) Election to invest in retirement bonds.--An 
                employer may elect to have the provider be the 
                Secretary by electing to have contributions under an 
                automatic IRA arrangement invested in retirement bonds 
                described in section 440(d).
            ``(2) Multiple employer arrangements and use of record 
        keepers.--An employer shall be treated as meeting the 
        requirements of this subsection if, in accordance with the 
        procedures established under section 440(e), the provider is 
        selected through the use of a record keeper described in 
        section 440(e)(1)(A), a sponsor of a multiple employer 
        arrangement described in section 440(e)(1)(B), or another 
        intermediary authorized by the Secretary under section 
        440(e)(1)(C).
    ``(h) Applicable Employer.--For purposes of this section--
            ``(1) In general.--The term `applicable employer' means, 
        with respect to any calendar year, an employer which had at 
        least the applicable number of employees who received at least 
        $5,000 of compensation (as defined in section 408(p)(6)(A)) 
        from the employer for the preceding calendar year.
            ``(2) Employers not in existence.--Such term shall not 
        include an employer which was not in existence at all times 
        during the calendar year and the preceding calendar year.
            ``(3) Operating rules.--In determining the number of 
        employees for purposes of this subsection--
                    ``(A) any rule applicable in determining the number 
                of employees for purposes of section 408(p)(2)(C) shall 
                be applicable under this subsection,
                    ``(B) all members of the same family (within the 
                meaning of section 318(a)(1)) shall be treated as 1 
                individual, and
                    ``(C) any reference to an employer shall include a 
                reference to any predecessor employer.
            ``(4) Applicable number.--For purposes of paragraph (1), 
        the term `applicable number' means the number of employees 
        determined in accordance with the following table:
                                                         The applicable
                                                         number for the
``If the calendar                                    preceding calendar
year is:                                                       year is:
        2013.........................................              100 
        2014.........................................               50 
        2015.........................................               25 
        2016 or thereafter...........................               10.
    ``(i) Qualified Plan or Arrangement.--For purposes of this 
section--
            ``(1) In general.--The term `qualified plan or arrangement' 
        means a plan, contract, pension, or trust described in section 
        219(g)(5).
            ``(2) Excluded plans.--Such term shall not include a plan 
        or arrangement if--
                    ``(A) the plan or arrangement is frozen as of the 
                first day of the preceding calendar year, or
                    ``(B) in the case of a plan or arrangement under 
                which the only contributions are discretionary on the 
                part of the sponsor, there has not been an employer 
                contribution made to the plan or arrangement for the 2-
                plan-year period ending with the last plan year ending 
                in the second preceding calendar year and it is not 
                reasonable to assume that an employer contribution will 
                be made for the plan year ending in the preceding 
                calendar year.
    ``(j) Authority.--The Secretary may prescribe rules to prevent 
avoidance of the requirements of this section through the use of 
insubstantial, frozen, or suspended plans or arrangements or by other 
means.

``SEC. 439. AUTOMATIC IRAS.

    ``(a) General Rule.--For purposes of this title--
            ``(1) an automatic IRA shall be treated in the same manner 
        as an individual retirement plan, and
            ``(2) the determination of whether the automatic IRA is 
        described in section 408 or 408A shall be made on the basis of 
        whether it meets the requirements of either such section.
    ``(b) Automatic IRA.--For purposes of this section, the term 
`automatic IRA' means an individual retirement plan (as defined in 
section 7701(a)(37)) which meets the investment and fee requirements 
set forth in this section.
    ``(c) Investment Options.--
            ``(1) In general.--The Secretary of Labor and the 
        Secretary, in consultation with the Chairman of the Securities 
        and Exchange Commission, shall, not later than 18 months after 
        the date of the enactment of this section, prescribe 
        regulations which set forth the requirements for each of the 
        classes of investments described in paragraph (2) and 
        procedures for determining which assets meet the requirements 
        for each of such classes.
            ``(2) Investment classes.--The regulations under paragraph 
        (1) shall provide that an automatic IRA shall allow the 
        individual on whose behalf the individual retirement plan is 
        established to invest contributions to, and earnings of, the 
        plan only in the following investment options:
                    ``(A) Principal preservation.--A class of assets or 
                fund that is designed to protect the principal of the 
                individual on an ongoing basis, including passbook 
                savings, certificates of deposit, insurance contracts, 
                mutual funds, United States savings bonds (which may be 
                indexed for inflation), or similar classes of assets.
                    ``(B) Blended investment option.--A broadly 
                diversified class of assets or fund, as specified in 
                such regulations, that is substantially similar to 
                target date, life cycle, balanced or similar funds, as 
                so specified.
                    ``(C) Third option.--A broadly diversified class of 
                assets or fund providing a somewhat higher investment 
                in equities than the investment options under 
                subparagraph (B), as specified in such regulations.
            ``(3) Use of low-cost funds; avoidance of complexity.--The 
        Secretary of Labor and the Secretary shall, in the regulations 
        prescribed under paragraph (1), provide that the investment 
        options under subparagraphs (A), (B), and (C) thereof be based 
        on low-cost investment options, which may include index funds, 
        and provide that such investment options avoid undue 
        complexity.
            ``(4) Flexibility.--The Secretary of Labor and the 
        Secretary, in consultation with the Chairman of the Securities 
        and Exchange Commission, shall periodically review the 
        investment options under paragraph (2) to ensure that such 
        options include appropriate alternative investment options that 
        become available after the initial investment options are 
        established. The Secretary of Labor and the Secretary, in 
        consultation with the Chairman of the Securities and Exchange 
        Commission, may revise such options if the Secretary of Labor 
        and the Secretary determine necessary, but only to the extent 
        that the new options--
                    ``(A) are consistent with the risk-return profiles 
                of the investment classes described in paragraph (2), 
                and
                    ``(B) are low-cost investment options as provided 
                in paragraph (3).
    ``(d) Investment Fees.--
            ``(1) In general.--The Secretary of Labor and the 
        Secretary, in consultation with the Chairman of the Securities 
        and Exchange Commission, shall include in the regulations under 
        subsection (c)(1)--
                    ``(A) clear and uniform methods for reporting the 
                fees imposed with respect to the investment options 
                provided under subsection (c), and
                    ``(B) a prohibition on charging additional fees 
                solely on the basis that the balance in an automatic 
                IRA is small.
            ``(2) Availability.--The Secretary shall provide for the 
        information described in paragraph (1)(A) to be furnished or 
        made available to employers and employees, and included on the 
        Internet website established under section 440, in such a 
        manner that employers and employees will be able to easily 
        compare fees of all providers under the various investment 
        options.
            ``(3) Fees.--For purposes of this subsection, the term 
        `fee' includes any fee, commission, asset management charge, 
        compensation for services, or any other charge or expense 
        specified in the regulations described in paragraph (1) which 
        is imposed with respect to the automatic IRA.

``SEC. 440. RULES RELATING TO CHOICE OF INVESTMENT PROVIDERS.

    ``(a) In General.--The Secretary shall establish a program to 
assist in the implementation of this part. Such program shall include--
            ``(1) the establishment of an Internet website meeting the 
        requirements of subsection (b),
            ``(2) the establishment of an arrangement meeting the 
        requirements of subsection (c) for the default assignment of 
        automatic IRA providers to employers, and
            ``(3) procedures for record keepers, multiple employer 
        arrangements, and other intermediaries described in section 
        440(e) to administer any automatic IRA arrangement of an 
        employer required under this section.
    ``(b) Internet Website.--
            ``(1) In general.--The Secretary shall develop an Internet 
        website or other electronic means by which--
                    ``(A) employers can obtain information on automatic 
                IRA arrangements, including the required notices and 
                forms described in section 438(e)(3)(C),
                    ``(B) providers of automatic IRAs may register for 
                inclusion in a list of providers of automatic IRAs from 
                which employers may designate for purposes of section 
                438(g)(1)(A),
                    ``(C) employers may elect to have contributions 
                under an automatic IRA arrangement made to a provider 
                selected under the default provider program established 
                under subsection (c), and
                    ``(D) employers may elect to have contributions 
                under an automatic IRA arrangement made to the 
                retirement bond program established under subsection 
                (d).
            ``(2) Registration.--A provider seeking to register under 
        paragraph (1)(B) shall provide such information as the 
        Secretary may require in order to ensure that an employer may 
        easily compare and select a provider from among providers that 
        serve the employer's geographic area and that are appropriate 
        for the employer taking into account other relevant 
        characteristics of the employer.
            ``(3) Secretary may limit registration.--The Secretary--
                    ``(A) may by regulation provide standards for 
                inclusion on the website list described in paragraph 
                (1)(B), and
                    ``(B) shall establish procedures for a provider to 
                certify that it meets those standards.
    ``(c) Default Assignment of Automatic IRA Providers.--
            ``(1) In general.--The Secretary shall include in the 
        program under subsection (a) an arrangement under which 
        employers electing under section 438(g)(1)(B) to be included in 
        the program would be randomly assigned a provider from the 
        participating providers selected under paragraph (2) to 
        establish automatic IRAs for its employees under the automatic 
        IRA arrangement.
            ``(2) Establishment.--The Secretary, through a competitive 
        process, shall select providers of automatic IRAs for 
        participation in the arrangement under this subsection from 
        among providers who apply for inclusion in such arrangement. 
        The Secretary shall select such providers, and the number of 
        such providers, taking into account--
                    ``(A) the extent of the provider's willingness to 
                accept all employers that are in the geographic area 
                the provider serves, that elect to participate in the 
                arrangement under paragraph (1), and that are randomly 
                assigned to the provider,
                    ``(B) the investment options offered through the 
                provider's automatic IRA, particularly the value such 
                options offer to participants (taking into account the 
                relative fees), and
                    ``(C) whether or not inclusion of the provider will 
                avoid concentration of assets in too few providers.
            ``(3) Alternate arrangement.--The Secretary may establish 
        an alternate arrangement to carry out the responsibilities of 
        the participating providers under this subsection if the 
        Secretary determines such arrangement would reduce 
        administrative costs and burdens.
    ``(d) Retirement Bond Program.--
            ``(1) In general.--The Secretary shall include in the 
        program under subsection (a) an arrangement under which--
                    ``(A) employers may elect for purposes of section 
                438(g)(1)(C) to have all payments described in section 
                438(c)(1) with respect to a qualifying employee be 
                deposited for investment in a retirement bond described 
                in paragraph (3) in the name of such qualifying 
                employee, and
                    ``(B) if the value of the retirement bond as of the 
                time specified in clause (i) of section 438(d)(3)(A) 
                exceeds the amount specified in such clause, the 
                Secretary shall, unless otherwise directed by the 
                qualifying employee after receiving written notice, 
                redeem such bond and transfer the proceeds from such 
                redemption (and any subsequent deposits described in 
                subparagraph (A)) to the blended investment option of 
                the automatic IRA described in section 439(c)(2)(B) 
                established for such employee by a provider selected 
                under subsection (c) as the provider for employees of 
                that employer.
            ``(2) Details of arrangement.--
                    ``(A) Simplification.--The Secretary shall ensure 
                that under the arrangement no more than 1 retirement 
                bond of each type (traditional or Roth) is issued for 
                each TIN and that contributions may be applied to the 
                purchase of retirement bonds without undue 
                administrative or paperwork requirements.
                    ``(B) Treatment of contributions.--For purposes of 
                this title--
                            ``(i) any payment invested under the 
                        arrangement shall be treated as if it were 
                        contributed to and held under an individual 
                        retirement plan established on behalf of the 
                        employee and as if the provider of the 
                        individual retirement plan were described in 
                        section 408(a)(2), and
                            ``(ii) for purposes of section 
                        408(d)(3)(B), the transfer under paragraph 
                        (1)(B) or subparagraph (C) shall be 
                        disregarded.
                    ``(C) Forwarding of certain payments.--If--
                            ``(i) an employer has elected to make 
                        contributions to the Secretary, and
                            ``(ii) either--
                                    ``(I) an employee has designated a 
                                provider to receive automatic payroll 
                                deduction contributions, or
                                    ``(II) the Secretary has 
                                transferred the proceeds of a redeemed 
                                retirement bond to the provider 
                                selected under the procedures under 
                                paragraph (1)(B),
                        then the Secretary shall periodically forward 
                        the amount contributed to the designated or 
                        selected provider.
                    ``(D) Notice.--The Secretary shall provide notice 
                to a qualifying employee within a reasonable period 
                before a redemption under paragraph (1)(B) that informs 
                the employee of the option to direct the Secretary not 
                to redeem such bond or to transfer the proceeds of the 
                redemption to an individual retirement plan of a 
                provider selected by the employee.
            ``(3) Retirement bonds.--For purposes of this subsection, 
        the term `retirement bond' means a bond issued under chapter 31 
        of title 31, which by its terms, or by regulations or other 
        guidance prescribed by the Secretary under such chapter--
                    ``(A) provides for interest to be credited at rates 
                that take into account the expected duration of the 
                funds invested in retirement bonds,
                    ``(B) provides for the interest to be determined or 
                adjusted in a manner and with sufficient frequency to 
                provide substantial protection from inflation,
                    ``(C) is designed for investment under an automatic 
                IRA, and
                    ``(D) is not transferable.
    ``(e) Alternative Structures.--
            ``(1) In general.--The Secretary may, under the program 
        established under subsection (a), establish procedures under 
        which the responsibilities for implementing an automatic IRA 
        arrangement under this part may be carried out through--
                    ``(A) record keepers (including persons performing 
                recordkeeping services in connection with their 
                investment products, payroll processors, or payroll 
                software providers) that meet such requirements as the 
                Secretary and the Secretary of Labor may establish and 
                that contract with providers of automatic IRAs,
                    ``(B) sponsors of arrangements involving multiple 
                employers, or
                    ``(C) other intermediaries authorized by the 
                Secretary and the Secretary of Labor.
            ``(2) Other rules.--
                    ``(A) Bonding.--The requirements under paragraph 
                (1)(A) may include bonding requirements similar to the 
                requirements under section 412 of the Employee 
                Retirement Income Security Act of 1974 for persons who 
                handle money or other property of automatic IRAs.
                    ``(B) Separate accounts.--For purposes of this 
                part, each separate account under a trust created or 
                organized in the United States by a person described in 
                paragraph (1) or a provider of an automatic IRA shall, 
                except to the extent provided by the Secretary, be 
                treated as an individual retirement account described 
                in section 408(a) if the trust would be described in 
                section 408(c) had it been created or organized by an 
                employer.
            ``(3) Rule of construction.--Nothing in this subsection 
        shall be construed to prohibit a person described in paragraph 
        (1) that otherwise qualifies as a trustee or issuer of an 
        automatic IRA from registering for inclusion in the list 
        described in subsection (b)(1)(B) or participating in the 
        competitive process under subsection (c)(2).''.
    (b) Notice of Availability of Investment Guidelines.--Section 
408(i) of the Internal Revenue Code of 1986 (relating to reports) is 
amended by adding at the end the following new sentence: ``Any report 
furnished under paragraph (2) to an individual shall include notice of 
the availability of, and methods of acquiring, the basic investment 
guidelines prepared by the Secretary of Labor.''.
    (c) Development of Basic Investment Guidelines.--
            (1) In general.--The Secretary of Labor shall, in 
        consultation with the Secretary of the Treasury, develop and 
        publish basic guidelines for investing for retirement. Except 
        as otherwise provided by the Secretary of Labor, such 
        guidelines shall include--
                    (A) information on the benefits of diversification,
                    (B) information on the essential differences, in 
                terms of risk and return, between various pension plan 
                investments, including stocks, bonds, mutual funds, and 
                money market investments,
                    (C) information on how an individual's pension plan 
                investment allocations may differ depending on the 
                individual's age and years to retirement and on other 
                factors determined by the Secretary of Labor,
                    (D) sources of information where individuals may 
                learn more about pension rights, individual investing, 
                and investment advice, and
                    (E) such other information related to individual 
                investing as the Secretary of Labor determines 
                appropriate.
            (2) Calculation information.--The guidelines under 
        paragraph (1) shall include addresses for Internet sites and 
        worksheets which a participant or beneficiary in a pension plan 
        may use to calculate--
                    (A) the retirement age value of the participant's 
                or beneficiary's nonforfeitable pension benefits under 
                the plan (expressed as an annuity amount and determined 
                by reference to varied historical annual rates of 
                return and annuity interest rates), and
                    (B) other important amounts relating to retirement 
                savings, including the amount which a participant or 
                beneficiary would be required to save annually to 
                provide a retirement income equal to various 
                percentages of current salary (adjusted for expected 
                growth prior to retirement).
            (3) Public comment.--The Secretary of Labor shall provide 
        at least 90 days for public comment on proposed guidelines 
        before publishing the final guidelines.
            (4) Rules relating to guidelines.--The guidelines under 
        paragraph (1)--
                    (A) shall be written in a manner calculated to be 
                understood by the average plan participant, and
                    (B) may be delivered in written, electronic, or 
                other appropriate manner to the extent such manner 
                would ensure that the guidelines are reasonably 
                accessible to participants and beneficiaries.
    (d) Failure To Provide Access to Automatic IRA Arrangements.--
Chapter 43 of the Internal Revenue Code of 1986 (relating to qualified 
pension, etc., plans) is amended by adding at the end the following new 
section:

``SEC. 4980J. REQUIREMENTS FOR APPLICABLE EMPLOYERS TO PROVIDE 
              EMPLOYEES ACCESS TO AUTOMATIC IRA ARRANGEMENTS.

    ``(a) General Rule.--There is hereby imposed a tax on any failure 
by an applicable employer (as defined in section 438(h)) to meet the 
requirements of section 438 for a calendar year.
    ``(b) Amount.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure for any calendar year shall be 
        $100 with respect to each employee to whom such failure 
        relates.
            ``(2) Tax not to apply where failure not discovered and 
        reasonable diligence exercised.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that the 
        employer subject to liability for the tax did not know that the 
        failure existed and exercised reasonable diligence to meet the 
        requirements of section 438.
            ``(3) Tax not to apply to failures corrected within 90 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) the employer subject to liability for the tax 
                under subsection (a) exercised reasonable diligence to 
                meet the requirements of section 438, and
                    ``(B) the employer provides the automatic IRA 
                arrangement described in section 438 to each employee 
                eligible to participate in the arrangement by the end 
                of the 90-day period beginning on the first date the 
                employer knew, or exercising reasonable diligence would 
                have known, that such failure existed.
            ``(4) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive or otherwise inequitable relative to the failure 
        involved. The Secretary, in consultation with the Secretary of 
        Labor, may establish a voluntary corrections program as part of 
        the waiver authority under this paragraph.
    ``(c) Procedures for Notice.--The Secretary may prescribe and 
implement procedures for obtaining from employers confirmation that 
such employers are in compliance with the requirements of section 438. 
The Secretary, in the Secretary's discretion, may prescribe that the 
confirmation shall be obtained on an annual or less frequent basis, and 
may use for this purpose the annual report or quarterly report for 
employment taxes, or such other means as the Secretary may deem 
advisable.''.
    (e) Provisions Relating to Penalties.--
            (1) Penalty for failure timely to remit contributions to 
        automatic ira arrangements.--Section 4975(c) of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new paragraph:
            ``(7) Special rule for automatic ira arrangements.--For 
        purposes of paragraph (1), if an employer is required under an 
        automatic IRA arrangement under section 438 to deposit amounts 
        withheld from an employee's compensation into a designated 
        automatic IRA but fails to do so within the time prescribed 
        under such arrangement, such amounts shall be treated as assets 
        of the automatic IRA.''.
            (2) Waiver of early withdrawal penalty for certain 
        distributions following initial election to participate in 
        qualified automatic ira arrangement.--Subsection (t) of section 
        72 of such Code is amended by adding at the end the following 
        new paragraph:
            ``(11) Distribution following initial election to 
        participate in qualified automatic ira arrangement.--Paragraph 
        (1) shall not apply in the case of a distribution to a 
        qualifying employee made not later than 90 days after the 
        initial election under section 438(c)(1)(A).''.
    (f) Coordination With ERISA.--
            (1) Exemption.--
                    (A) In general.--Section 3(2) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1002(2))) is amended--
                            (i) by inserting ``or (C)'' after 
                        ``subparagraph (B)'' in subparagraph (A), and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(C) An automatic IRA arrangement described in 
                section 438(c) of the Internal Revenue Code of 1986 
                shall not be treated as an employee pension benefit 
                plan or pension plan if, under the arrangement, 
                contributions are to be made to a designated automatic 
                IRA the provider of which is included on the website 
                list established under section 440(b) of such Code, are 
                to be made to an individual retirement plan pursuant to 
                section 440(c), or are to be made to the Secretary of 
                the Treasury for investment in retirement bonds 
                pursuant to section 440(d).''.
                    (B) Customer identification program.--
                Notwithstanding the amendment made by subparagraph (A), 
                an individual retirement plan established pursuant to 
                an automatic IRA arrangement described in section 
                438(c) of the Internal Revenue Code of 1986 shall, for 
                purposes of any customer identification program 
                established under section 5318(l) of title 31, United 
                States Code, be treated as an account opened for the 
                purpose of participating in an employee benefit plan 
                established under the Employee Retirement Income 
                Security Act of 1974.
            (2) Fiduciary duties.--Section 404(c)(2) of such Act is 
        amended--
                    (A) by inserting the following sentence before the 
                last sentence: ``In the case of an automatic IRA 
                designated by the employer under section 438 of such 
                Code that is not exempt under section 3(2)(C), a 
                participant or beneficiary shall, for purposes of 
                paragraph (1), be treated as exercising control over 
                the assets in the account on and after the 7th day 
                after notice has been given to an employee that such 
                automatic IRA has been established on behalf of the 
                employee.'', and
                    (B) by inserting ``or with respect to an automatic 
                IRA designated by an employer under section 438 of such 
                Code'' after ``arrangement'' in the last sentence.
    (g) Preemption of Conflicting State Laws.--Section 514(e) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1144(e)(1)) 
is amended by adding at the end the following:
            ``(5) Notwithstanding any other provision of this section, 
        this title shall supersede any law of a State which would 
        directly or indirectly prohibit or restrict the establishment 
        or operation of an automatic IRA arrangement in accordance with 
        section 438 of the Internal Revenue Code of 1986. Nothing in 
        this title shall be construed to impair or supersede any State 
        law to the extent it provides a remedy for the failure to make 
        payments required under such arrangement within the required 
        time period under such section 438.''.
    (h) Mandatory Transfers.--Section 401(a)(31)(B) of the Internal 
Revenue Code of 1986 is amended by inserting ``(including an automatic 
IRA)'' after ``individual retirement plan'' each place it appears.
    (i) Automatic IRA Advisory Group.--
            (1) In general.--Not later than 60 days after the date of 
        enactment of this Act, the Secretary of the Treasury and the 
        Secretary of Labor shall jointly establish an Automatic IRA 
        Advisory Group (in this subsection referred to as the 
        ``Advisory Group''). The purpose of the Advisory Group shall be 
        to make recommendations regarding requirements for the 
        automatic IRA investment options and procedures described in 
        section 439(c) of the Internal Revenue Code of 1986, including 
        disclosure of information regarding fees and expenses and such 
        other related matters as may be determined by the Secretaries.
            (2) Membership.--The Advisory Group shall consist of not 
        more than 15 members and shall be composed of--
                    (A) such persons as the Secretaries of the Treasury 
                and Labor may consider appropriate to provide expertise 
                regarding investments for retirement, including 
                providers of individual retirement accounts and 
                individual retirement annuities described in section 
                408 or 408A of such Code; and
                    (B) one or more representatives of the Department 
                of Labor and of the Department of the Treasury.
            (3) Compensation.--The members of the Advisory Group shall 
        serve without compensation.
            (4) Administrative support.--The Department of the Treasury 
        and the Department of Labor shall jointly provide appropriate 
        administrative support to the Advisory Group, including 
        technical assistance. The Advisory Group may use the services 
        and facilities of such Departments, with or without 
        reimbursement, as jointly determined by such Departments.
            (5) Reports by advisory group.--Not later than 12 months 
        after the date of the enactment of this Act, the Advisory Group 
        shall submit to the Secretary of Labor and the Secretary of the 
        Treasury a report containing its recommendations. The 
        Secretaries may request that the Advisory Group submit 
        subsequent reports.
    (j) Conforming Amendment.--The table of parts for subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 
after the item relating to part III the following new item:

                ``PART IV--Automatic IRA Arrangements.''

    (k) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2012.

SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING AUTOMATIC IRA 
              ARRANGEMENTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45S. SMALL EMPLOYER AUTOMATIC IRA CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer maintaining an automatic IRA arrangement meeting the 
requirements of section 438 (without regard to whether the employer is 
required to maintain the arrangement), the small employer automatic IRA 
credit determined under this section for any taxable year is the amount 
determined under subsection (b).
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this section for any taxable year with respect to an 
        eligible employer shall be equal to the lesser of--
                    ``(A) $25 multiplied by the number of qualifying 
                employees (within the meaning of section 438(b)) for 
                whom contributions are made under the automatic IRA 
                arrangement referred to in subsection (a) for the 
                calendar year in which the taxable year begins, or
                    ``(B) $250.
            ``(2) Duration of credit.--No credit shall be determined 
        under this section for any taxable year other than a taxable 
        year which begins during the first 2 calendar years in which 
        the eligible employer maintains an automatic IRA arrangement 
        meeting the requirements of section 438.
            ``(3) Coordination with small employer startup credit.--No 
        credit shall be allowed under this section to the employer for 
        any taxable year if a credit is determined under section 45E 
        with respect to the employer for the taxable year.
    ``(c) Eligible Employer.--For purposes of this section, the term 
`eligible employer' means, with respect to any calendar year in which 
the taxable year begins, an employer which maintains an automatic IRA 
arrangement meeting the requirements of section 438, which had no more 
than 100 employees on each day during the preceding calendar year, and 
which did not maintain a qualified plan or arrangement (as defined in 
section 438(i)) during any portion of the calendar year preceding the 
adoption of the automatic IRA arrangement or any portion of the 2 
preceding calendar years.
    ``(d) Other Rules.--For purposes of this section, the rules of 
section 45E(e) shall apply.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of the Internal Revenue Code of 1986 (defining current year 
business credit) is amended by striking ``plus'' at the end of 
paragraph (35), by striking the period at the end of paragraph (36) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(37) in the case of an eligible employer (as defined in 
        section 45S(c)) maintaining an automatic IRA arrangement 
        meeting the requirements of section 438, the small employer 
        automatic IRA credit determined under section 45S(a).''
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 45S. Small employer automatic IRA credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

SEC. 4. PROMOTING QUALIFIED PLANS.

    (a) Increase in Credit for Small Employer Pension Plan Startup 
Costs.--
            (1) In general.--Section 45E(b)(1) of the Internal Revenue 
        Code of 1986 is amended by striking ``$500'' and inserting 
        ``$1,000''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning after December 31, 2011.
    (b) Eliminating Barriers to Use of Multiple Employer Plans.--The 
Secretaries of the Treasury and Labor shall, within 12 months after the 
date of the enactment of this Act--
            (1) prescribe guidance establishing conditions under which 
        an employer participating in a plan described in section 413(c) 
        of the Internal Revenue Code of 1986 shall not have any 
        liability under title I of the Employee Retirement Income 
        Security Act of 1974 with respect to the acts or omissions of 
        one or more other participating employers, which regulations 
        may require that the portion of the plan attributable to such 
        participating employers be spun off to plans maintained by such 
        employers,
            (2) prescribe guidance establishing conditions under which 
        a plan described in section 413(c) of such Code may be treated 
        as satisfying the qualification requirements of sections 401(a) 
        and 413(c) of such Code despite the violation of such 
        requirements by one or more participating employers, including 
        requiring, if appropriate, that the portion of the plan 
        attributable to such participating employers be spun off to 
        plans maintained by such employers, and
            (3) prescribe guidance providing simplified means, 
        including a model plan document, by which plans described in 
        section 413(c) of such Code may satisfy the requirements of 
        sections 102, 103, and 105 of the Employee Retirement Income 
        Security Act of 1974.

SEC. 5. STUDIES.

    (a) Studies of Spousal Consent Requirements and Promotion of 
Certain Lifetime Income Arrangements.--The Secretary of the Treasury 
and the Secretary of Labor shall jointly conduct a separate study of 
the feasibility and desirability of each of the following:
            (1) Extending to automatic IRAs spousal consent 
        requirements similar to, or based on, those that apply under 
        the Federal Employees' Thrift Savings Plan, including 
        consideration of whether modifications of such requirements are 
        necessary to apply the requirements to automatic IRAs.
            (2) Promoting the use of low-cost annuities, longevity 
        insurance, or other guaranteed lifetime income arrangements in 
        automatic IRAs, including consideration of--
                    (A) appropriate means of arranging for, or 
                encouraging, individuals to receive at least a portion 
                of their distributions in some form of low-cost 
                guaranteed lifetime income, and
                    (B) issues presented by possible additional 
                differences in, or uniformity of, provisions governing 
                different IRAs.
    (b) Study of Consolidation of Individual Retirement Plans.--The 
Secretary of the Treasury and the Secretary of Labor shall jointly 
conduct a separate study of the feasibility and desirability of--
            (1) using data on investments in individual retirement 
        accounts and annuities to enable individuals with multiple such 
        accounts and annuities that include very small amounts to 
        receive periodic notices informing them about the location of 
        these accounts and how such accounts and annuities might be 
        consolidated, and
            (2) using investment arrangements associated with automatic 
        IRAs to assist in addressing the problem of abandoned accounts.
    (c) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Secretaries shall report the results of each 
study conducted under subsections (a) and (b), together with any 
recommendations for legislative changes, to the Committees on Finance 
and Health, Education, Labor, and Pensions of the Senate and the 
Committees on Ways and Means and Education and Labor of the House of 
Representatives.
                                 <all>
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