II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Automatic IRA Act 

5 of 2011’’. 


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1 SEC. 2. EMPLOYEES NOT COVERED BY QUALIFIED RETIRE2 MENT PLANS OR ARRANGEMENTS ENTITLED 

3 TO PARTICIPATE IN AUTOMATIC IRA AR4 RANGEMENTS. 

5 (a) IN GENERAL.—Subchapter D of chapter 1 of the 

6 Internal Revenue Code of 1986 (relating to pension, prof7 it-sharing, stock bonus plans, etc.) is amended by inserting 

8 at the end the following new part: 

9 ‘‘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. 

10 ‘‘SEC. 438. RIGHT TO AUTOMATIC IRA ARRANGEMENTS AT 

11 WORK. 

12 ‘‘(a) REQUIREMENT TO PROVIDE AUTOMATIC IRA 

13 ARRANGEMENT.—If an applicable employer does not 

14 maintain a qualified plan or arrangement (as defined in 

15 subsection (i)) for any calendar year, the employer shall 

16 make available an automatic IRA arrangement which 

17 meets the requirements of this section to each qualifying 

18 employee of the employer for the calendar year. 

19 ‘‘(b) QUALIFYING EMPLOYEE DEFINED.—For pur20 poses of this section— 

21 ‘‘(1) IN GENERAL.—The term ‘qualifying em22 ployee’ means any employee of the employer other 

23 than an excludable employee. 


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1 ‘‘(2) EXCLUDABLE EMPLOYEE.—The term ‘ex2 cludable employee’ means any employee who is in 

3 one of the following categories of employees that the 

4 employer elects to exclude from treatment as quali5 fying employees: 

6 ‘‘(A) Employees described in section 

7 410(b)(3), 

8 ‘‘(B) Employees who have not attained the 

9 age of 18 before the beginning of the calendar 

10 year, or 

11 ‘‘(C) Employees who have not completed at 

12 least 3 months of service with the employer, 

13 ‘‘(3) EXCEPTION FOR EMPLOYEES OF GOVERN14 MENTS AND CHURCHES.—The term ‘qualifying em15 ployee’ shall not include an employee of— 

16 ‘‘(A) a government or entity described in 

17 section 414(d), or 

18 ‘‘(B) a church or a convention or associa19 tion of churches which is exempt from tax 

20 under section 501, including any employee de21 scribed in section 414(e)(3)(B). 

22 ‘‘(4) PLAN SPONSOR’S EMPLOYEES.— 

23 ‘‘(A) IN GENERAL.—If— 

24 ‘‘(i) an employer maintains 1 or more 

25 qualified plans or arrangements, and 


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1 ‘‘(ii) the employees of a subsidiary, di2 vision, or other major business unit of the 

3 employer are not generally eligible to par4 ticipate in any such qualified plan or ar5 rangement, 

6 then, except as provided in subparagraph (B), 

7 the employer shall make available an automatic 

8 IRA arrangement which meets the requirements 

9 of this section to all qualifying employees de10 scribed in clause (ii) for the calendar year. 

11 ‘‘(B) EXCEPTION FOR CERTAIN EMPLOY12 EES.—An employer may exclude from coverage 

13 under the automatic IRA arrangement under 

14 subparagraph (A)— 

15 ‘‘(i) any employee not eligible to par16 ticipate in any qualified plan or arrange17 ment solely because the employee has not 

18 satisfied the minimum age and service re19 quirements for participation in the plan or 

20 arrangement, 

21 ‘‘(ii) in the case of an employer which 

22 maintains a qualified plan or arrangement 

23 which consists of a section 403(b) annuity 

24 contract (including a custodial account), 

25 an arrangement described in section 


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1 408(p), or a simplified employee pension 

2 described in section 408(k), any employee 

3 who is permitted to be excluded from, or 

4 who is not required to be eligible to partici5 pate in, any such plan, arrangement, or 

6 pension under section 403(b)(12), 

7 408(p)(4), or 408(k)(2), whichever is ap8 plicable. 

9 ‘‘(5) DESIGNATION OF QUALIFYING EMPLOY10 EES.—The Secretary shall issue guidelines for deter11 mining the class or classes of qualifying employees 

12 to be covered by an automatic IRA arrangement. 

13 Such guidelines shall permit employers to designate 

14 under paragraph (2) the classification or categories 

15 of employees who are not eligible for the arrange16 ment. 

17 ‘‘(6) EMPLOYEE INCLUDES SELF-EMPLOYED.— 

18 For purposes of this part, an employer described in 

19 section 401(c)(4) may elect to treat self-employed in20 dividuals (within the meaning of section 401(c)(1)) 

21 as employees of the trade or business, except that if 

22 the employer has employees other than such individ23 uals, the employer may only make the election under 

24 this paragraph if the employer makes available an 

25 automatic IRA arrangement to such other employees 


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1 in accordance with the rules of subsection (a) and 

2 paragraph (4). 

3 ‘‘(c) AUTOMATIC IRA ARRANGEMENT.—For pur4 poses of this section, the term ‘automatic IRA arrange5 ment’ means an arrangement of an employer— 

6 ‘‘(1) under which, in accordance with subsection 

7 (d)— 

8 ‘‘(A) a qualifying employee may elect to 

9 have an amount contributed to a designated 

10 automatic IRA established on behalf of the em11 ployee instead of having that amount paid to 

12 the employee directly in cash, 

13 ‘‘(B) a qualifying employee is treated as 

14 having elected such contributions in the amount 

15 specified in subsection (d)(2) until the employee 

16 specifically elects not to have such contributions 

17 made (or specifically elects to have such con18 tributions made at a different percentage or in 

19 a different amount), and 

20 ‘‘(C) the contributions are invested as pro21 vided in subsection (d)(3), 

22 ‘‘(2) under which payments are to be made to 

23 the designated automatic IRA of each qualifying em24 ployee by having the employer of the employee— 


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1 ‘‘(A) make periodic direct deposit or other 

2 payroll deposit payments (including electronic 

3 payments) to the plan by payroll deduction, or 

4 ‘‘(B) in the case of employees not paid 

5 through regular periodic payments, make such 

6 deposit or payments in such manner as the Sec7 retary may provide in guidance, including 

8 through available automatic debit or similar ar9 rangements or the use of authorized inter10 mediary entities such as business, professional, 

11 or trade associations, 

12 ‘‘(3) under which the payments described in 

13 paragraph (1) are to be made by the employer on or 

14 before— 

15 ‘‘(A) the last day of the month following 

16 the month in which the compensation would 

17 otherwise have been payable to the employee in 

18 cash, or 

19 ‘‘(B) such later date as the Secretary may 

20 prescribe, except that the Secretary may not 

21 prescribe a date later than the due date for the 

22 deposit of tax required to be deducted and with23 held under chapter 24 (relating to collection of 

24 income tax at source on wages) for the payroll 

25 period to which such payments relate, and 


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1 ‘‘(4) which meets the notice and election re2 quirements of subsection (e). 

3 ‘‘(d) DEFINITIONS AND RULES RELATING TO AUTO4 MATIC ENROLLMENT REQUIREMENTS.—For purposes of 

5 this section— 

6 ‘‘(1) DESIGNATED AUTOMATIC IRA.— 

7 ‘‘(A) IN GENERAL.—Except as provided in 

8 subparagraph (B), the term ‘designated auto9 matic IRA’ means, with respect to any auto10 matic IRA arrangement of an employer, an 

11 automatic IRA of a provider designated by, or 

12 on behalf of, the employer under subsection (g). 

13 ‘‘(B) IRA SPECIFIED BY EMPLOYEE.—An 

14 employer may also elect to allow each of its 

15 qualifying employees to designate an individual 

16 retirement plan (whether or not an automatic 

17 IRA) established by or on behalf of the em18 ployee as the designated automatic IRA with 

19 respect to that employee. 

20 ‘‘(C) SPECIAL RULES.— 

21 ‘‘(i) NOTICE REQUIREMENT.—If con22 tributions are made to designated auto23 matic IRAs that are designated by the em24 ployer in accordance with subparagraph 

25 (A), the employer shall provide each parVerDate Mar 15 2010 02:08 Sep 16, 2011 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557

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1 ticipating employee a standard written no2 tice, as provided by the Secretary, that the 

3 employee’s balance may be periodically 

4 transferred without cost or penalty from 

5 the designated automatic IRA to another 

6 individual retirement plan, or to a retire7 ment bond described in section 440(d), es8 tablished by or on behalf of the employee. 

9 ‘‘(ii) TREATMENT OF PERIODIC

10 TRANSFERS.—For tax treatment of trans11 fers described in clause (i), see subsection 

12 (f)(3). 

13 ‘‘(D) CONTRIBUTIONS TO DESIGNATED

14 AUTOMATIC IRAS.—An employer shall not be 

15 treated as failing to satisfy the requirements of 

16 this section or any other provision of this title 

17 merely because the employer makes all con18 tributions (or all contributions on behalf of 

19 qualifying employees who do not specify a des20 ignated automatic IRA under subparagraph 

21 (B)) to a designated automatic IRA or to a re22 tirement bond described in section 440(d) and 

23 held on behalf of the employee. 

24 ‘‘(2) AMOUNT OF CONTRIBUTIONS.— 


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1 ‘‘(A) IN GENERAL.—The amount specified 

2 in this paragraph is— 

3 ‘‘(i) 3 percent of compensation, or 

4 ‘‘(ii) such other percentage of com5 pensation as is specified in regulations pre6 scribed by the Secretary which is not less 

7 than 2 percent or more than 4 percent. 

8 ‘‘(B) AUTHORITY OF SECRETARY TO PRO9 VIDE FOR PERIODIC INCREASES.—In the case of 

10 qualifying employees under an automatic IRA 

11 arrangement for 2 or more consecutive years, 

12 the Secretary may by regulation provide for 

13 periodic (not more frequent than annual) in14 creases in the percentage of compensation an 

15 employee is deemed to have elected under sub16 paragraph (A). 

17 ‘‘(C) PERMITTED ADDITIONAL PROCE18 DURES TO LIMIT CONTRIBUTIONS.—An em19 ployer— 

20 ‘‘(i) shall have no responsibility for 

21 any calendar year for determining whether, 

22 or ensuring that, the contributions with re23 spect to any employee do not exceed the 

24 deductible amount in effect for taxable 

25 years beginning in the calendar year under 


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1 section 219(b)(5) (determined without re2 gard to subparagraph (B) thereof), and 

3 ‘‘(ii) shall not be treated as failing to 

4 satisfy the requirements of this section or 

5 any other provision of this title merely be6 cause the employer chooses to limit the 

7 contributions under this subsection on be8 half of a qualifying employee for any cal9 endar year in a manner reasonably de10 signed to avoid exceeding such deductible 

11 amount. 

12 ‘‘(3) INVESTMENT OF ASSETS IN AUTOMATIC

13 IRAS.— 

14 ‘‘(A) INVESTMENT IN SPECIFIED OP15 TIONS.—Amounts contributed under this sub16 section for a calendar year shall, unless other17 wise directed by the qualifying employee, be in18 vested in— 

19 ‘‘(i) the principal preservation invest20 ment option of the designated automatic 

21 IRA described in section 439(c)(2)(A) if, 

22 as of the close of the preceding calendar 

23 year or at such other time as may be pre24 scribed by the Secretary, the outstanding 

25 balance of such plan was less than the 


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1 amount described in paragraph (2)(C)(i), 

2 and 

3 ‘‘(ii) if clause (i) does not apply, the 

4 blended investment option of the des5 ignated automatic IRA described in section 

6 439(c)(2)(B), 

7 except that the Secretary may provide by regu8 lation or other guidance that, in the case of a 

9 designated automatic IRA to which clause (ii) 

10 applies, amounts previously invested in the 

11 principal preservation option shall be reinvested 

12 in the blended investment option. 

13 ‘‘(B) TYPE OF AUTOMATIC IRA.—A quali14 fying employee for whom a designated auto15 matic IRA is established under paragraph 

16 (1)(A) may elect, at such time and in such 

17 manner and form as the Secretary may pre18 scribe, whether to treat the plan as described, 

19 or not described, in section 408A. If no such 

20 election is made, the plan shall be treated as 

21 described in section 408A. 

22 ‘‘(4) ALTERNATIVE AUTOMATIC ENROLLMENT

23 PROCEDURE.—An arrangement shall not be treated 

24 as failing to meet the automatic enrollment require25 ments under subsection (c)(1)(B) merely because the 


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1 employer, in accordance with guidance prescribed by 

2 the Secretary, elects to provide employees with com3 munications informing the employees that the em4 ployer wishes to obtain from each employee an af5 firmative election either to contribute (including 

6 specification by the employee of the information nec7 essary to permit the election to be implemented) or 

8 not to contribute to an automatic IRA, except that 

9 such employer shall treat any employee who fails to 

10 make such an election in the manner provided under 

11 subsection (c)(1)(B). 

12 ‘‘(e) ELECTION AND NOTICE REQUIREMENTS.— 

13 ‘‘(1) ELECTION REQUIREMENTS.—Each auto14 matic IRA arrangement shall permit— 

15 ‘‘(A) each qualifying employee to elect, 

16 during the 60-day period or other period speci17 fied by the Secretary before the beginning of 

18 any calendar year (and during the 60-day pe19 riod or other period specified by the Secretary 

20 before the first day the employee is eligible to 

21 participate), to participate in the arrangement, 

22 or to modify the employee’s election under the 

23 arrangement (including the amounts subject to 

24 the arrangement and the manner in which such 

25 amounts are invested), for such year, and 


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1 ‘‘(B) subject to a requirement for reason2 able notice, an employee to elect to terminate 

3 participation in the arrangement at any time 

4 during a calendar year, except that if an em5 ployee so terminates, the employer may provide 

6 that the employee may not resume participation 

7 until the beginning of the next calendar year. 

8 ‘‘(2) EMPLOYER NOTICE.—Under an automatic 

9 IRA arrangement, the employer shall provide, within 

10 a reasonable period before the beginning of each pe11 riod described in paragraph (1)(A), a notice to each 

12 qualifying employee meeting the requirements of sec13 tion 414(w)(4). 

14 ‘‘(3) MODEL NOTICE, FORMS, AND WEBSITE.— 

15 The Secretary, in consultation with the Secretary of 

16 Labor, shall— 

17 ‘‘(A) provide a model notice, written in a 

18 manner calculated to be understandable to the 

19 average worker, that is simple for employers to 

20 use, that meets the requirements of paragraph 

21 (2), and that informs qualifying employees of 

22 the automatic enrollment arrangement (includ23 ing the types of individual retirement plans to 

24 which contributions may be deposited), 


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1 ‘‘(B) provide model forms for enrollment, 

2 including automatic enrollment, in an automatic 

3 IRA arrangement, and 

4 ‘‘(C) establish an Internet website under 

5 section 440 that allows employers and individ6 uals to obtain information on automatic IRA 

7 arrangements and on saving and investing for 

8 retirement, and to obtain required notices and 

9 forms. 

10 ‘‘(4) COORDINATION WITH WITHHOLDING.— 

11 The Secretary shall modify the withholding exemp12 tion certificate under section 3402(f) so that, in the 

13 case of any qualifying employee covered under an 

14 automatic IRA arrangement, any notice and election 

15 requirements with respect to the arrangement may 

16 be met through the use of an attachment to such 

17 certificate or other modifications of the withholding 

18 exemption procedures. 

19 ‘‘(f) AUTOMATIC IRA CONTRIBUTIONS TREATED

20 LIKE OTHER CONTRIBUTIONS TO INDIVIDUAL RETIRE21 MENT PLANS.— 

22 ‘‘(1) TAX TREATMENT UNAFFECTED.—The fact 

23 that a contribution to an individual retirement plan 

24 is made on behalf of a qualifying employee under an 

25 automatic IRA arrangement instead of being made 


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1 directly by the employee shall not affect the deduct2 ibility or other tax treatment of the contribution or 

3 of other amounts under this title. 

4 ‘‘(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN

5 INTO ACCOUNT.—Any contribution made on behalf 

6 of a qualifying employee under an automatic IRA 

7 arrangement shall be taken into account in applying 

8 the limitations on contributions to individual retire9 ment plans and the other provisions of this title ap10 plicable to individual retirement plans as if the con11 tribution had been made directly by the employee. 

12 ‘‘(3) ROLLOVER LIMIT NOT TO APPLY.—For 

13 purposes of section 408(d)(3)(B), there shall be dis14 regarded any qualified rollover contribution which is 

15 a transfer described in subsection (d)(1)(C)(i). 

16 ‘‘(g) DESIGNATION OF PROVIDER FOR EMPLOYER’S

17 AUTOMATIC IRA ARRANGEMENT.— 

18 ‘‘(1) IN GENERAL.—For purposes of subsection 

19 (d)(1)(A), the provider of an automatic IRA under 

20 any automatic IRA arrangement of an employer 

21 shall be the trustee or issuer of the individual retire22 ment plan and shall be determined under one of the 

23 following methods: 

24 ‘‘(A) PROVIDER DESIGNATED BY EM25 PLOYER.— 


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1 ‘‘(i) IN GENERAL.—An employer may 

2 designate a single provider for the auto3 matic IRA arrangement. 

4 ‘‘(ii) EXEMPTION FROM ERISA.—If 

5 the provider designated by the employer is 

6 included on the list of providers contained 

7 in the website established under section 

8 440(b), see the exemption under section 

9 3(2)(C) of the Employee Retirement In10 come Security Act of 1974 of the arrange11 ment from such Act. 

12 ‘‘(B) ELECTION TO USE DEFAULT PRO13 VIDER.—An employer may elect to have the 

14 provider selected on the employer’s behalf under 

15 the procedures established under section 440(c). 

16 ‘‘(C) ELECTION TO INVEST IN RETIRE17 MENT BONDS.—An employer may elect to have 

18 the provider be the Secretary by electing to 

19 have contributions under an automatic IRA ar20 rangement invested in retirement bonds de21 scribed in section 440(d). 

22 ‘‘(2) MULTIPLE EMPLOYER ARRANGEMENTS

23 AND USE OF RECORD KEEPERS.—An employer shall 

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1 lished under section 440(e), the provider is selected 

2 through the use of a record keeper described in sec3 tion 440(e)(1)(A), a sponsor of a multiple employer 

4 arrangement described in section 440(e)(1)(B), or 

5 another intermediary authorized by the Secretary 

6 under section 440(e)(1)(C). 

7 ‘‘(h) APPLICABLE EMPLOYER.—For purposes of this 

8 section— 

9 ‘‘(1) IN GENERAL.—The term ‘applicable em10 ployer’ means, with respect to any calendar year, an 

11 employer which had at least the applicable number 

12 of employees who received at least $5,000 of com13 pensation (as defined in section 408(p)(6)(A)) from 

14 the employer for the preceding calendar year. 

15 ‘‘(2) EMPLOYERS NOT IN EXISTENCE.—Such 

16 term shall not include an employer which was not in 

17 existence at all times during the calendar year and 

18 the preceding calendar year. 

19 ‘‘(3) OPERATING RULES.—In determining the 

20 number of employees for purposes of this sub21 section— 

22 ‘‘(A) any rule applicable in determining the 

23 number of employees for purposes of section 

24 408(p)(2)(C) shall be applicable under this sub25 section, 


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1 ‘‘(B) all members of the same family 

2 (within the meaning of section 318(a)(1)) shall 

3 be treated as 1 individual, and 

4 ‘‘(C) any reference to an employer shall in5 clude a reference to any predecessor employer. 

6 ‘‘(4) APPLICABLE NUMBER.—For purposes of 

7 paragraph (1), the term ‘applicable number’ means 

8 the number of employees determined in accordance 

9 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. 

10 ‘‘(i) QUALIFIED PLAN OR ARRANGEMENT.—For pur11 poses of this section— 

12 ‘‘(1) IN GENERAL.—The term ‘qualified plan or 

13 arrangement’ means a plan, contract, pension, or 

14 trust described in section 219(g)(5). 

15 ‘‘(2) EXCLUDED PLANS.—Such term shall not 

16 include a plan or arrangement if— 

17 ‘‘(A) the plan or arrangement is frozen as 

18 of the first day of the preceding calendar year, 

19 or 

20 ‘‘(B) in the case of a plan or arrangement 

21 under which the only contributions are discre22 tionary on the part of the sponsor, there has 


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1 not been an employer contribution made to the 

2 plan or arrangement for the 2-plan-year period 

3 ending with the last plan year ending in the 

4 second preceding calendar year and it is not 

5 reasonable to assume that an employer con6 tribution will be made for the plan year ending 

7 in the preceding calendar year. 

8 ‘‘(j) AUTHORITY.—The Secretary may prescribe rules 

9 to prevent avoidance of the requirements of this section 

10 through the use of insubstantial, frozen, or suspended 

11 plans or arrangements or by other means. 

12 ‘‘SEC. 439. AUTOMATIC IRAS. 

13 ‘‘(a) GENERAL RULE.—For purposes of this title— 

14 ‘‘(1) an automatic IRA shall be treated in the 

15 same manner as an individual retirement plan, and 

16 ‘‘(2) the determination of whether the auto17 matic IRA is described in section 408 or 408A shall 

18 be made on the basis of whether it meets the re19 quirements of either such section. 

20 ‘‘(b) AUTOMATIC IRA.—For purposes of this section, 

21 the term ‘automatic IRA’ means an individual retirement 

22 plan (as defined in section 7701(a)(37)) which meets the 

23 investment and fee requirements set forth in this section. 

24 ‘‘(c) INVESTMENT OPTIONS.— 


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1 ‘‘(1) IN GENERAL.—The Secretary of Labor 

2 and the Secretary, in consultation with the Chair3 man of the Securities and Exchange Commission, 

4 shall, not later than 18 months after the date of the 

5 enactment of this section, prescribe regulations 

6 which set forth the requirements for each of the 

7 classes of investments described in paragraph (2) 

8 and procedures for determining which assets meet 

9 the requirements for each of such classes. 

10 ‘‘(2) INVESTMENT CLASSES.—The regulations 

11 under paragraph (1) shall provide that an automatic 

12 IRA shall allow the individual on whose behalf the 

13 individual retirement plan is established to invest 

14 contributions to, and earnings of, the plan only in 

15 the following investment options: 

16 ‘‘(A) PRINCIPAL PRESERVATION.—A class 

17 of assets or fund that is designed to protect the 

18 principal of the individual on an ongoing basis, 

19 including passbook savings, certificates of de20 posit, insurance contracts, mutual funds, 

21 United States savings bonds (which may be in22 dexed for inflation), or similar classes of assets. 

23 ‘‘(B) BLENDED INVESTMENT OPTION.—A 

24 broadly diversified class of assets or fund, as 

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1 tially similar to target date, life cycle, balanced 

2 or similar funds, as so specified. 

3 ‘‘(C) THIRD OPTION.—A broadly diversi4 fied class of assets or fund providing a some5 what higher investment in equities than the in6 vestment options under subparagraph (B), as 

7 specified in such regulations. 

8 ‘‘(3) USE OF LOW-COST FUNDS; AVOIDANCE OF

9 COMPLEXITY.—The Secretary of Labor and the Sec10 retary shall, in the regulations prescribed under 

11 paragraph (1), provide that the investment options 

12 under subparagraphs (A), (B), and (C) thereof be 

13 based on low-cost investment options, which may in14 clude index funds, and provide that such investment 

15 options avoid undue complexity. 

16 ‘‘(4) FLEXIBILITY.—The Secretary of Labor 

17 and the Secretary, in consultation with the Chair18 man of the Securities and Exchange Commission, 

19 shall periodically review the investment options 

20 under paragraph (2) to ensure that such options in21 clude appropriate alternative investment options that 

22 become available after the initial investment options 

23 are established. The Secretary of Labor and the Sec24 retary, in consultation with the Chairman of the Se25 curities and Exchange Commission, may revise such 


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1 options if the Secretary of Labor and the Secretary 

2 determine necessary, but only to the extent that the 

3 new options— 

4 ‘‘(A) are consistent with the risk-return 

5 profiles of the investment classes described in 

6 paragraph (2), and 

7 ‘‘(B) are low-cost investment options as 

8 provided in paragraph (3). 

9 ‘‘(d) INVESTMENT FEES.— 

10 ‘‘(1) IN GENERAL.—The Secretary of Labor 

11 and the Secretary, in consultation with the Chair12 man of the Securities and Exchange Commission, 

13 shall include in the regulations under subsection 

14 (c)(1)— 

15 ‘‘(A) clear and uniform methods for report16 ing the fees imposed with respect to the invest17 ment options provided under subsection (c), and 

18 ‘‘(B) a prohibition on charging additional 

19 fees solely on the basis that the balance in an 

20 automatic IRA is small. 

21 ‘‘(2) AVAILABILITY.—The Secretary shall pro22 vide for the information described in paragraph 

23 (1)(A) to be furnished or made available to employ24 ers and employees, and included on the Internet 

25 website established under section 440, in such a 


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1 manner that employers and employees will be able to 

2 easily compare fees of all providers under the var3 ious investment options. 

4 ‘‘(3) FEES.—For purposes of this subsection, 

5 the term ‘fee’ includes any fee, commission, asset 

6 management charge, compensation for services, or 

7 any other charge or expense specified in the regula8 tions described in paragraph (1) which is imposed 

9 with respect to the automatic IRA. 

10 ‘‘SEC. 440. RULES RELATING TO CHOICE OF INVESTMENT 

11 PROVIDERS. 

12 ‘‘(a) IN GENERAL.—The Secretary shall establish a 

13 program to assist in the implementation of this part. Such 

14 program shall include— 

15 ‘‘(1) the establishment of an Internet website 

16 meeting the requirements of subsection (b), 

17 ‘‘(2) the establishment of an arrangement meet18 ing the requirements of subsection (c) for the default 

19 assignment of automatic IRA providers to employ20 ers, and 

21 ‘‘(3) procedures for record keepers, multiple 

22 employer arrangements, and other intermediaries de23 scribed in section 440(e) to administer any auto24 matic IRA arrangement of an employer required 

25 under this section. 


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1 ‘‘(b) INTERNET WEBSITE.— 

2 ‘‘(1) IN GENERAL.—The Secretary shall develop 

3 an Internet website or other electronic means by 

4 which— 

5 ‘‘(A) employers can obtain information on 

6 automatic IRA arrangements, including the re7 quired notices and forms described in section 

8 438(e)(3)(C), 

9 ‘‘(B) providers of automatic IRAs may reg10 ister for inclusion in a list of providers of auto11 matic IRAs from which employers may des12 ignate for purposes of section 438(g)(1)(A), 

13 ‘‘(C) employers may elect to have contribu14 tions under an automatic IRA arrangement 

15 made to a provider selected under the default 

16 provider program established under subsection 

17 (c), and 

18 ‘‘(D) employers may elect to have contribu19 tions under an automatic IRA arrangement 

20 made to the retirement bond program estab21 lished under subsection (d). 

22 ‘‘(2) REGISTRATION.—A provider seeking to 

23 register under paragraph (1)(B) shall provide such 

24 information as the Secretary may require in order to 

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1 lect a provider from among providers that serve the 

2 employer’s geographic area and that are appropriate 

3 for the employer taking into account other relevant 

4 characteristics of the employer. 

5 ‘‘(3) SECRETARY MAY LIMIT REGISTRATION.— 

6 The Secretary— 

7 ‘‘(A) may by regulation provide standards 

8 for inclusion on the website list described in 

9 paragraph (1)(B), and 

10 ‘‘(B) shall establish procedures for a pro11 vider to certify that it meets those standards. 

12 ‘‘(c) DEFAULT ASSIGNMENT OF AUTOMATIC IRA 

13 PROVIDERS.— 

14 ‘‘(1) IN GENERAL.—The Secretary shall include 

15 in the program under subsection (a) an arrangement 

16 under which employers electing under section 

17 438(g)(1)(B) to be included in the program would 

18 be randomly assigned a provider from the partici19 pating providers selected under paragraph (2) to es20 tablish automatic IRAs for its employees under the 

21 automatic IRA arrangement. 

22 ‘‘(2) ESTABLISHMENT.—The Secretary, 

23 through a competitive process, shall select providers 

24 of automatic IRAs for participation in the arrange25 ment under this subsection from among providers 


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1 who apply for inclusion in such arrangement. The 

2 Secretary shall select such providers, and the num3 ber of such providers, taking into account— 

4 ‘‘(A) the extent of the provider’s willing5 ness to accept all employers that are in the geo6 graphic area the provider serves, that elect to 

7 participate in the arrangement under paragraph 

8 (1), and that are randomly assigned to the pro9 vider, 

10 ‘‘(B) the investment options offered 

11 through the provider’s automatic IRA, particu12 larly the value such options offer to participants 

13 (taking into account the relative fees), and 

14 ‘‘(C) whether or not inclusion of the pro15 vider will avoid concentration of assets in too 

16 few providers. 

17 ‘‘(3) ALTERNATE ARRANGEMENT.—The Sec18 retary may establish an alternate arrangement to 

19 carry out the responsibilities of the participating 

20 providers under this subsection if the Secretary de21 termines such arrangement would reduce adminis22 trative costs and burdens. 

23 ‘‘(d) RETIREMENT BOND PROGRAM.— 


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1 ‘‘(1) IN GENERAL.—The Secretary shall include 

2 in the program under subsection (a) an arrangement 

3 under which— 

4 ‘‘(A) employers may elect for purposes of 

5 section 438(g)(1)(C) to have all payments de6 scribed in section 438(c)(1) with respect to a 

7 qualifying employee be deposited for investment 

8 in a retirement bond described in paragraph (3) 

9 in the name of such qualifying employee, and 

10 ‘‘(B) if the value of the retirement bond as 

11 of the time specified in clause (i) of section 

12 438(d)(3)(A) exceeds the amount specified in 

13 such clause, the Secretary shall, unless other14 wise directed by the qualifying employee after 

15 receiving written notice, redeem such bond and 

16 transfer the proceeds from such redemption 

17 (and any subsequent deposits described in sub18 paragraph (A)) to the blended investment op19 tion of the automatic IRA described in section 

20 439(c)(2)(B) established for such employee by a 

21 provider selected under subsection (c) as the 

22 provider for employees of that employer. 

23 ‘‘(2) DETAILS OF ARRANGEMENT.— 

24 ‘‘(A) SIMPLIFICATION.—The Secretary 

25 shall ensure that under the arrangement no 


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1 more than 1 retirement bond of each type (tra2 ditional or Roth) is issued for each TIN and 

3 that contributions may be applied to the pur4 chase of retirement bonds without undue ad5 ministrative or paperwork requirements. 

6 ‘‘(B) TREATMENT OF CONTRIBUTIONS.— 

7 For purposes of this title— 

8 ‘‘(i) any payment invested under the 

9 arrangement shall be treated as if it were 

10 contributed to and held under an indi11 vidual retirement plan established on be12 half of the employee and as if the provider 

13 of the individual retirement plan were de14 scribed in section 408(a)(2), and 

15 ‘‘(ii) for purposes of section 

16 408(d)(3)(B), the transfer under para17 graph (1)(B) or subparagraph (C) shall be 

18 disregarded. 

19 ‘‘(C) FORWARDING OF CERTAIN PAY20 MENTS.—If— 

21 ‘‘(i) an employer has elected to make 

22 contributions to the Secretary, and 

23 ‘‘(ii) either— 


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1 ‘‘(I) an employee has designated 

2 a provider to receive automatic payroll 

3 deduction contributions, or 

4 ‘‘(II) the Secretary has trans5 ferred the proceeds of a redeemed re6 tirement bond to the provider selected 

7 under the procedures under paragraph 

8 (1)(B), 

9 then the Secretary shall periodically for10 ward the amount contributed to the des11 ignated or selected provider. 

12 ‘‘(D) NOTICE.—The Secretary shall pro13 vide notice to a qualifying employee within a 

14 reasonable period before a redemption under 

15 paragraph (1)(B) that informs the employee of 

16 the option to direct the Secretary not to redeem 

17 such bond or to transfer the proceeds of the re18 demption to an individual retirement plan of a 

19 provider selected by the employee. 

20 ‘‘(3) RETIREMENT BONDS.—For purposes of 

21 this subsection, the term ‘retirement bond’ means a 

22 bond issued under chapter 31 of title 31, which by 

23 its terms, or by regulations or other guidance pre24 scribed by the Secretary under such chapter— 


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1 ‘‘(A) provides for interest to be credited at 

2 rates that take into account the expected dura3 tion of the funds invested in retirement bonds, 

4 ‘‘(B) provides for the interest to be deter5 mined or adjusted in a manner and with suffi6 cient frequency to provide substantial protection 

7 from inflation, 

8 ‘‘(C) is designed for investment under an 

9 automatic IRA, and 

10 ‘‘(D) is not transferable. 

11 ‘‘(e) ALTERNATIVE STRUCTURES.— 

12 ‘‘(1) IN GENERAL.—The Secretary may, under 

13 the program established under subsection (a), estab14 lish procedures under which the responsibilities for 

15 implementing an automatic IRA arrangement under 

16 this part may be carried out through— 

17 ‘‘(A) record keepers (including persons 

18 performing recordkeeping services in connection 

19 with their investment products, payroll proc20 essors, or payroll software providers) that meet 

21 such requirements as the Secretary and the 

22 Secretary of Labor may establish and that con23 tract with providers of automatic IRAs, 

24 ‘‘(B) sponsors of arrangements involving 

25 multiple employers, or 


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1 ‘‘(C) other intermediaries authorized by 

2 the Secretary and the Secretary of Labor. 

3 ‘‘(2) OTHER RULES.— 

4 ‘‘(A) BONDING.—The requirements under 

5 paragraph (1)(A) may include bonding require6 ments similar to the requirements under section 

7 412 of the Employee Retirement Income Secu8 rity Act of 1974 for persons who handle money 

9 or other property of automatic IRAs. 

10 ‘‘(B) SEPARATE ACCOUNTS.—For purposes 

11 of this part, each separate account under a 

12 trust created or organized in the United States 

13 by a person described in paragraph (1) or a 

14 provider of an automatic IRA shall, except to 

15 the extent provided by the Secretary, be treated 

16 as an individual retirement account described in 

17 section 408(a) if the trust would be described in 

18 section 408(c) had it been created or organized 

19 by an employer. 

20 ‘‘(3) RULE OF CONSTRUCTION.—Nothing in 

21 this subsection shall be construed to prohibit a per22 son described in paragraph (1) that otherwise quali23 fies as a trustee or issuer of an automatic IRA from 

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1 section (b)(1)(B) or participating in the competitive 

2 process under subsection (c)(2).’’. 

3 (b) NOTICE OF AVAILABILITY OF INVESTMENT

4 GUIDELINES.—Section 408(i) of the Internal Revenue 

5 Code of 1986 (relating to reports) is amended by adding 

6 at the end the following new sentence: ‘‘Any report fur7 nished under paragraph (2) to an individual shall include 

8 notice of the availability of, and methods of acquiring, the 

9 basic investment guidelines prepared by the Secretary of 

10 Labor.’’. 

11 (c) DEVELOPMENT OF BASIC INVESTMENT GUIDE12 LINES.— 

13 (1) IN GENERAL.—The Secretary of Labor 

14 shall, in consultation with the Secretary of the 

15 Treasury, develop and publish basic guidelines for 

16 investing for retirement. Except as otherwise pro17 vided by the Secretary of Labor, such guidelines 

18 shall include— 

19 (A) information on the benefits of diver20 sification, 

21 (B) information on the essential dif22 ferences, in terms of risk and return, between 

23 various pension plan investments, including 

24 stocks, bonds, mutual funds, and money market 

25 investments, 


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1 (C) information on how an individual’s 

2 pension plan investment allocations may differ 

3 depending on the individual’s age and years to 

4 retirement and on other factors determined by 

5 the Secretary of Labor, 

6 (D) sources of information where individ7 uals may learn more about pension rights, indi8 vidual investing, and investment advice, and 

9 (E) such other information related to indi10 vidual investing as the Secretary of Labor de11 termines appropriate. 

12 (2) CALCULATION INFORMATION.—The guide13 lines under paragraph (1) shall include addresses for 

14 Internet sites and worksheets which a participant or 

15 beneficiary in a pension plan may use to calculate— 

16 (A) the retirement age value of the partici17 pant’s or beneficiary’s nonforfeitable pension 

18 benefits under the plan (expressed as an annu19 ity amount and determined by reference to var20 ied historical annual rates of return and annu21 ity interest rates), and 

22 (B) other important amounts relating to 

23 retirement savings, including the amount which 

24 a participant or beneficiary would be required 

25 to save annually to provide a retirement income 


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1 equal to various percentages of current salary 

2 (adjusted for expected growth prior to retire3 ment). 

4 (3) PUBLIC COMMENT.—The Secretary of 

5 Labor shall provide at least 90 days for public com6 ment on proposed guidelines before publishing the 

7 final guidelines. 

8 (4) RULES RELATING TO GUIDELINES.—The 

9 guidelines under paragraph (1)— 

10 (A) shall be written in a manner calculated 

11 to be understood by the average plan partici12 pant, and 

13 (B) may be delivered in written, electronic, 

14 or other appropriate manner to the extent such 

15 manner would ensure that the guidelines are 

16 reasonably accessible to participants and bene17 ficiaries. 

18 (d) FAILURE TO PROVIDE ACCESS TO AUTOMATIC

19 IRA ARRANGEMENTS.—Chapter 43 of the Internal Rev20 enue Code of 1986 (relating to qualified pension, etc., 

21 plans) is amended by adding at the end the following new 

22 section: 


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1 ‘‘SEC. 4980J. REQUIREMENTS FOR APPLICABLE EMPLOY2 ERS TO PROVIDE EMPLOYEES ACCESS TO 

3 AUTOMATIC IRA ARRANGEMENTS. 

4 ‘‘(a) GENERAL RULE.—There is hereby imposed a 

5 tax on any failure by an applicable employer (as defined 

6 in section 438(h)) to meet the requirements of section 438 

7 for a calendar year. 

8 ‘‘(b) AMOUNT.— 

9 ‘‘(1) IN GENERAL.—The amount of the tax im10 posed by subsection (a) on any failure for any cal11 endar year shall be $100 with respect to each em12 ployee to whom such failure relates. 

13 ‘‘(2) TAX NOT TO APPLY WHERE FAILURE NOT

14 DISCOVERED AND REASONABLE DILIGENCE EXER15 CISED.—No tax shall be imposed by subsection (a) 

16 on any failure during any period for which it is es17 tablished to the satisfaction of the Secretary that the 

18 employer subject to liability for the tax did not know 

19 that the failure existed and exercised reasonable dili20 gence to meet the requirements of section 438. 

21 ‘‘(3) TAX NOT TO APPLY TO FAILURES COR22 RECTED WITHIN 90 DAYS.—No tax shall be imposed 

23 by subsection (a) on any failure if— 

24 ‘‘(A) the employer subject to liability for 

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1 able diligence to meet the requirements of sec2 tion 438, and 

3 ‘‘(B) the employer provides the automatic 

4 IRA arrangement described in section 438 to 

5 each employee eligible to participate in the ar6 rangement by the end of the 90-day period be7 ginning on the first date the employer knew, or 

8 exercising reasonable diligence would have 

9 known, that such failure existed. 

10 ‘‘(4) WAIVER BY SECRETARY.—In the case of a 

11 failure which is due to reasonable cause and not to 

12 willful neglect, the Secretary may waive part or all 

13 of the tax imposed by subsection (a) to the extent 

14 that the payment of such tax would be excessive or 

15 otherwise inequitable relative to the failure involved. 

16 The Secretary, in consultation with the Secretary of 

17 Labor, may establish a voluntary corrections pro18 gram as part of the waiver authority under this 

19 paragraph. 

20 ‘‘(c) PROCEDURES FOR NOTICE.—The Secretary may 

21 prescribe and implement procedures for obtaining from 

22 employers confirmation that such employers are in compli23 ance with the requirements of section 438. The Secretary, 

24 in the Secretary’s discretion, may prescribe that the con25 firmation shall be obtained on an annual or less frequent 


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•S 1557 IS

1 basis, and may use for this purpose the annual report or 

2 quarterly report for employment taxes, or such other 

3 means as the Secretary may deem advisable.’’. 

4 (e) PROVISIONS RELATING TO PENALTIES.— 

5 (1) PENALTY FOR FAILURE TIMELY TO REMIT

6 CONTRIBUTIONS TO AUTOMATIC IRA ARRANGE7 MENTS.—Section 4975(c) of the Internal Revenue 

8 Code of 1986 is amended by adding at the end the 

9 following new paragraph: 

10 ‘‘(7) SPECIAL RULE FOR AUTOMATIC IRA AR11 RANGEMENTS.—For purposes of paragraph (1), if 

12 an employer is required under an automatic IRA ar13 rangement under section 438 to deposit amounts 

14 withheld from an employee’s compensation into a 

15 designated automatic IRA but fails to do so within 

16 the time prescribed under such arrangement, such 

17 amounts shall be treated as assets of the automatic 

18 IRA.’’. 

19 (2) WAIVER OF EARLY WITHDRAWAL PENALTY

20 FOR CERTAIN DISTRIBUTIONS FOLLOWING INITIAL

21 ELECTION TO PARTICIPATE IN QUALIFIED AUTO22 MATIC IRA ARRANGEMENT.—Subsection (t) of sec23 tion 72 of such Code is amended by adding at the 

24 end the following new paragraph: 


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1 ‘‘(11) DISTRIBUTION FOLLOWING INITIAL

2 ELECTION TO PARTICIPATE IN QUALIFIED AUTO3 MATIC IRA ARRANGEMENT.—Paragraph (1) shall not 

4 apply in the case of a distribution to a qualifying 

5 employee made not later than 90 days after the ini6 tial election under section 438(c)(1)(A).’’. 

7 (f) COORDINATION WITH ERISA.— 

8 (1) EXEMPTION.— 

9 (A) IN GENERAL.—Section 3(2) of the 

10 Employee Retirement Income Security Act of 

11 1974 (29 U.S.C. 1002(2))) is amended— 

12 (i) by inserting ‘‘or (C)’’ after ‘‘sub13 paragraph (B)’’ in subparagraph (A), and 

14 (ii) by adding at the end the following 

15 new subparagraph: 

16 ‘‘(C) An automatic IRA arrangement de17 scribed in section 438(c) of the Internal Rev18 enue Code of 1986 shall not be treated as an 

19 employee pension benefit plan or pension plan 

20 if, under the arrangement, contributions are to 

21 be made to a designated automatic IRA the 

22 provider of which is included on the website list 

23 established under section 440(b) of such Code, 

24 are to be made to an individual retirement plan 

25 pursuant to section 440(c), or are to be made 


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•S 1557 IS

1 to the Secretary of the Treasury for investment 

2 in retirement bonds pursuant to section 

3 440(d).’’. 

4 (B) CUSTOMER IDENTIFICATION PRO5 GRAM.—Notwithstanding the amendment made 

6 by subparagraph (A), an individual retirement 

7 plan established pursuant to an automatic IRA 

8 arrangement described in section 438(c) of the 

9 Internal Revenue Code of 1986 shall, for pur10 poses of any customer identification program 

11 established under section 5318(l) of title 31, 

12 United States Code, be treated as an account 

13 opened for the purpose of participating in an 

14 employee benefit plan established under the 

15 Employee Retirement Income Security Act of 

16 1974. 

17 (2) FIDUCIARY DUTIES.—Section 404(c)(2) of 

18 such Act is amended— 

19 (A) by inserting the following sentence be20 fore the last sentence: ‘‘In the case of an auto21 matic IRA designated by the employer under 

22 section 438 of such Code that is not exempt 

23 under section 3(2)(C), a participant or bene24 ficiary shall, for purposes of paragraph (1), be 

25 treated as exercising control over the assets in 


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•S 1557 IS

1 the account on and after the 7th day after no2 tice has been given to an employee that such 

3 automatic IRA has been established on behalf 

4 of the employee.’’, and 

5 (B) by inserting ‘‘or with respect to an 

6 automatic IRA designated by an employer 

7 under section 438 of such Code’’ after ‘‘ar8 rangement’’ in the last sentence. 

9 (g) PREEMPTION OF CONFLICTING STATE LAWS.— 

10 Section 514(e) of the Employee Retirement Income Secu11 rity Act of 1974 (29 U.S.C. 1144(e)(1)) is amended by 

12 adding at the end the following: 

13 ‘‘(5) Notwithstanding any other provision of 

14 this section, this title shall supersede any law of a 

15 State which would directly or indirectly prohibit or 

16 restrict the establishment or operation of an auto17 matic IRA arrangement in accordance with section 

18 438 of the Internal Revenue Code of 1986. Nothing 

19 in this title shall be construed to impair or supersede 

20 any State law to the extent it provides a remedy for 

21 the failure to make payments required under such 

22 arrangement within the required time period under 

23 such section 438.’’. 

24 (h) MANDATORY TRANSFERS.—Section 

25 401(a)(31)(B) of the Internal Revenue Code of 1986 is 


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1 amended by inserting ‘‘(including an automatic IRA)’’ 

2 after ‘‘individual retirement plan’’ each place it appears. 

3 (i) AUTOMATIC IRA ADVISORY GROUP.— 

4 (1) IN GENERAL.—Not later than 60 days after 

5 the date of enactment of this Act, the Secretary of 

6 the Treasury and the Secretary of Labor shall joint7 ly establish an Automatic IRA Advisory Group (in 

8 this subsection referred to as the ‘‘Advisory 

9 Group’’). The purpose of the Advisory Group shall 

10 be to make recommendations regarding requirements 

11 for the automatic IRA investment options and proce12 dures described in section 439(c) of the Internal 

13 Revenue Code of 1986, including disclosure of infor14 mation regarding fees and expenses and such other 

15 related matters as may be determined by the Secre16 taries. 

17 (2) MEMBERSHIP.—The Advisory Group shall 

18 consist of not more than 15 members and shall be 

19 composed of— 

20 (A) such persons as the Secretaries of the 

21 Treasury and Labor may consider appropriate 

22 to provide expertise regarding investments for 

23 retirement, including providers of individual re24 tirement accounts and individual retirement anVerDate Mar 15 2010 02:08 Sep 16, 2011 Jkt 099200 PO 00000 Frm 00042 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557

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1 nuities described in section 408 or 408A of 

2 such Code; and 

3 (B) one or more representatives of the De4 partment of Labor and of the Department of 

5 the Treasury. 

6 (3) COMPENSATION.—The members of the Ad7 visory Group shall serve without compensation. 

8 (4) ADMINISTRATIVE SUPPORT.—The Depart9 ment of the Treasury and the Department of Labor 

10 shall jointly provide appropriate administrative sup11 port to the Advisory Group, including technical as12 sistance. The Advisory Group may use the services 

13 and facilities of such Departments, with or without 

14 reimbursement, as jointly determined by such De15 partments. 

16 (5) REPORTS BY ADVISORY GROUP.—Not later 

17 than 12 months after the date of the enactment of 

18 this Act, the Advisory Group shall submit to the 

19 Secretary of Labor and the Secretary of the Treas20 ury a report containing its recommendations. The 

21 Secretaries may request that the Advisory Group 

22 submit subsequent reports. 

23 (j) CONFORMING AMENDMENT.—The table of parts 

24 for subchapter A of chapter 1 of the Internal Revenue 


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1 Code of 1986 is amended by inserting after the item relat2 ing to part III the following new item: 

‘‘PART IV—AUTOMATIC IRA ARRANGEMENTS.’’ 

3 (k) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to calendar years beginning after 

5 December 31, 2012. 

6 SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING 

7 AUTOMATIC IRA ARRANGEMENTS. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 

10 1986 (relating to business related credits) is amended by 

11 adding at the end the following new section: 

12 ‘‘SEC. 45S. SMALL EMPLOYER AUTOMATIC IRA CREDIT. 

13 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

14 in the case of an eligible employer maintaining an auto15 matic IRA arrangement meeting the requirements of sec16 tion 438 (without regard to whether the employer is re17 quired to maintain the arrangement), the small employer 

18 automatic IRA credit determined under this section for 

19 any taxable year is the amount determined under sub20 section (b). 

21 ‘‘(b) AMOUNT OF CREDIT.— 

22 ‘‘(1) IN GENERAL.—The amount of the credit 

23 determined under this section for any taxable year 

24 with respect to an eligible employer shall be equal to 

25 the lesser of— 


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1 ‘‘(A) $25 multiplied by the number of 

2 qualifying employees (within the meaning of 

3 section 438(b)) for whom contributions are 

4 made under the automatic IRA arrangement re5 ferred to in subsection (a) for the calendar year 

6 in which the taxable year begins, or 

7 ‘‘(B) $250. 

8 ‘‘(2) DURATION OF CREDIT.—No credit shall be 

9 determined under this section for any taxable year 

10 other than a taxable year which begins during the 

11 first 2 calendar years in which the eligible employer 

12 maintains an automatic IRA arrangement meeting 

13 the requirements of section 438. 

14 ‘‘(3) COORDINATION WITH SMALL EMPLOYER

15 STARTUP CREDIT.—No credit shall be allowed under 

16 this section to the employer for any taxable year if 

17 a credit is determined under section 45E with re18 spect to the employer for the taxable year. 

19 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this 

20 section, the term ‘eligible employer’ means, with respect 

21 to any calendar year in which the taxable year begins, an 

22 employer which maintains an automatic IRA arrangement 

23 meeting the requirements of section 438, which had no 

24 more than 100 employees on each day during the pre25 ceding calendar year, and which did not maintain a qualiVerDate Mar 15 2010 02:08 Sep 16, 2011 Jkt 099200 PO 00000 Frm 00045 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557

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1 fied plan or arrangement (as defined in section 438(i)) 

2 during any portion of the calendar year preceding the 

3 adoption of the automatic IRA arrangement or any por4 tion of the 2 preceding calendar years. 

5 ‘‘(d) OTHER RULES.—For purposes of this section, 

6 the rules of section 45E(e) shall apply.’’. 

7 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI8 NESS CREDIT.—Section 38(b) of the Internal Revenue 

9 Code of 1986 (defining current year business credit) is 

10 amended by striking ‘‘plus’’ at the end of paragraph (35), 

11 by striking the period at the end of paragraph (36) and 

12 inserting ‘‘, plus’’, and by adding at the end the following 

13 new paragraph: 

14 ‘‘(37) in the case of an eligible employer (as de15 fined in section 45S(c)) maintaining an automatic 

16 IRA arrangement meeting the requirements of sec17 tion 438, the small employer automatic IRA credit 

18 determined under section 45S(a).’’ 

19 (c) CLERICAL AMENDMENT.—The table of sections 

20 for subpart D of part IV of subchapter A of chapter 1 

21 of the Internal Revenue Code of 1986 is amended by add22 ing at the end the following new item: 

‘‘Sec. 45S. Small employer automatic IRA credit.’’. 

23 (d) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to taxable years beginning after 

25 December 31, 2012. 


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1 SEC. 4. PROMOTING QUALIFIED PLANS. 

2 (a) INCREASE IN CREDIT FOR SMALL EMPLOYER

3 PENSION PLAN STARTUP COSTS.— 

4 (1) IN GENERAL.—Section 45E(b)(1) of the In5 ternal Revenue Code of 1986 is amended by striking 

6 ‘‘$500’’ and inserting ‘‘$1,000’’. 

7 (2) EFFECTIVE DATE.—The amendment made 

8 by this subsection shall apply to taxable years begin9 ning after December 31, 2011. 

10 (b) ELIMINATING BARRIERS TO USE OF MULTIPLE

11 EMPLOYER PLANS.—The Secretaries of the Treasury and 

12 Labor shall, within 12 months after the date of the enact13 ment of this Act— 

14 (1) prescribe guidance establishing conditions 

15 under which an employer participating in a plan de16 scribed in section 413(c) of the Internal Revenue 

17 Code of 1986 shall not have any liability under title 

18 I of the Employee Retirement Income Security Act 

19 of 1974 with respect to the acts or omissions of one 

20 or more other participating employers, which regula21 tions may require that the portion of the plan attrib22 utable to such participating employers be spun off to 

23 plans maintained by such employers, 

24 (2) prescribe guidance establishing conditions 

25 under which a plan described in section 413(c) of 

26 such Code may be treated as satisfying the qualificaVerDate Mar 15 2010 02:08 Sep 16, 2011 Jkt 099200 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557

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1 tion requirements of sections 401(a) and 413(c) of 

2 such Code despite the violation of such requirements 

3 by one or more participating employers, including 

4 requiring, if appropriate, that the portion of the plan 

5 attributable to such participating employers be spun 

6 off to plans maintained by such employers, and 

7 (3) prescribe guidance providing simplified 

8 means, including a model plan document, by which 

9 plans described in section 413(c) of such Code may 

10 satisfy the requirements of sections 102, 103, and 

11 105 of the Employee Retirement Income Security 

12 Act of 1974. 

13 SEC. 5. STUDIES. 

14 (a) STUDIES OF SPOUSAL CONSENT REQUIREMENTS

15 AND PROMOTION OF CERTAIN LIFETIME INCOME AR16 RANGEMENTS.—The Secretary of the Treasury and the 

17 Secretary of Labor shall jointly conduct a separate study 

18 of the feasibility and desirability of each of the following: 

19 (1) Extending to automatic IRAs spousal con20 sent requirements similar to, or based on, those that 

21 apply under the Federal Employees’ Thrift Savings 

22 Plan, including consideration of whether modifica23 tions of such requirements are necessary to apply 

24 the requirements to automatic IRAs. 


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1 (2) Promoting the use of low-cost annuities, 

2 longevity insurance, or other guaranteed lifetime in3 come arrangements in automatic IRAs, including 

4 consideration of— 

5 (A) appropriate means of arranging for, or 

6 encouraging, individuals to receive at least a 

7 portion of their distributions in some form of 

8 low-cost guaranteed lifetime income, and 

9 (B) issues presented by possible additional 

10 differences in, or uniformity of, provisions gov11 erning different IRAs. 

12 (b) STUDY OF CONSOLIDATION OF INDIVIDUAL RE13 TIREMENT PLANS.—The Secretary of the Treasury and 

14 the Secretary of Labor shall jointly conduct a separate 

15 study of the feasibility and desirability of— 

16 (1) using data on investments in individual re17 tirement accounts and annuities to enable individ18 uals with multiple such accounts and annuities that 

19 include very small amounts to receive periodic no20 tices informing them about the location of these ac21 counts and how such accounts and annuities might 

22 be consolidated, and 

23 (2) using investment arrangements associated 

24 with automatic IRAs to assist in addressing the 

25 problem of abandoned accounts. 


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1 (c) REPORT.—Not later than 18 months after the 

2 date of the enactment of this Act, the Secretaries shall 

3 report the results of each study conducted under sub4 sections (a) and (b), together with any recommendations 

5 for legislative changes, to the Committees on Finance and 

6 Health, Education, Labor, and Pensions of the Senate and 

7 the Committees on Ways and Means and Education and 

8 Labor of the House of Representatives. 

Æ 


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