II 

115TH CONGRESS 

1ST SESSION S. 1861 

To amend the Internal Revenue Code of 1986 to expand personal saving 

and retirement savings coverage by enabling employees not covered by 

qualifying retirement plans to save for retirement through automatic 

IRA arrangements, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 26, 2017 

Mr. WHITEHOUSE 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 saving and retirement savings coverage by enabling employees not covered by qualifying retirement 

plans to save for retirement through automatic IRA arrangements, 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; REFERENCE. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Automatic IRA Act of 2017’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amendVerDate Sep 11 2014 00:29 Sep 28, 2017 Jkt 069200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1861.IS S1861

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1 ment or repeal is expressed in terms of an amendment 

2 to, or repeal of, a section or other provision, the reference 

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986. 

5 SEC. 2. QUALIFYING AUTOMATIC IRA ARRANGEMENTS. 

6 (a) IN GENERAL.—Subpart A of part I of subchapter 

7 D of chapter 1 of the Internal Revenue Code of 1986 is 

8 amended by inserting after section 408A the following new 

9 section: 

10 ‘‘SEC. 408B. QUALIFYING AUTOMATIC IRA ARRANGEMENTS. 

11 ‘‘(a) IN GENERAL.—For purposes of this section, a 

12 qualifying automatic IRA arrangement is an automatic 

13 IRA arrangement which is offered by a covered employer 

14 to each qualifying employee of the employer. 

15 ‘‘(b) COVERED EMPLOYER.—For purposes of this 

16 section— 

17 ‘‘(1) IN GENERAL.—Except as otherwise pro18 vided in this subsection or subsection (c)(2), the 

19 term ‘covered employer’ means, with respect to any 

20 year, an employer which does not maintain a quali21 fying plan or arrangement described in section 

22 219(g)(5) for the calendar year. 

23 ‘‘(2) EXCLUDED PLANS.—A qualifying plan or 

24 arrangement shall not be taken into account for pur25 poses of paragraph (1) if— 


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

2 of the first day of the preceding calendar year, 

3 or 

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

5 under which the only contributions are discre6 tionary on the part of the employer or other 

7 plan sponsor— 

8 ‘‘(i) no employer contribution has 

9 been made to the plan or arrangement for 

10 the 3-plan-year period ending with the last 

11 plan year ending in the preceding calendar 

12 year, and 

13 ‘‘(ii) it is not reasonable to assume 

14 that an employer contribution will be made 

15 for the last plan year ending in the pre16 ceding calendar year. 

17 ‘‘(3) EXCEPTION FOR CERTAIN SMALL AND

18 NEW EMPLOYERS.— 

19 ‘‘(A) IN GENERAL.—The term ‘covered em20 ployer’ does not include an employer for a cal21 endar year if the employer— 

22 ‘‘(i) did not employ more than 10 em23 ployees who received at least $5,000 of 

24 compensation (as defined in section 


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1 3401(a)) from the employer for the pre2 ceding calendar year, 

3 ‘‘(ii) did not normally employ more 

4 than 10 employees on a typical business 

5 day of the preceding calendar year, or 

6 ‘‘(iii) was not in existence at all times 

7 during the calendar year and the preceding 

8 calendar year. 

9 ‘‘(B) OPERATING RULES.—In determining 

10 the number of employees for purposes of sub11 paragraph (A)— 

12 ‘‘(i) rules consistent with any rules 

13 applicable in determining the number of 

14 employees for purposes of section 

15 408(p)(2)(C) and section 4980B(d) shall 

16 apply, 

17 ‘‘(ii) all members of the same family 

18 (within the meaning of section 318(a)(1)) 

19 shall be treated as 1 individual, and 

20 ‘‘(iii) any reference to an employer 

21 shall include a reference to any predecessor 

22 employer. 

23 ‘‘(4) EXCEPTION FOR GOVERNMENTS AND

24 CHURCHES.—The term ‘covered employer’ does not 

25 include— 


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

2 section 414(d), or 

3 ‘‘(B) a church or a convention or associa4 tion of churches which is exempt from tax 

5 under section 501. 

6 ‘‘(5) AGGREGATION RULE.—All persons treated 

7 as a single employer under subsection (a) or (b) of 

8 section 52 or subsection (m) or (o) of section 414 

9 shall be treated as a single employer. 

10 ‘‘(c) QUALIFYING EMPLOYEE.—For purposes of this 

11 section— 

12 ‘‘(1) IN GENERAL.—The term ‘qualifying em13 ployee’ means any employee of the employer who is 

14 not an excluded employee. 

15 ‘‘(2) PLAN SPONSOR’S EMPLOYEES.—If— 

16 ‘‘(A) an employer maintains one or more 

17 qualifying plans or arrangements described in 

18 section 219(g)(5), 

19 ‘‘(B) the employees of any subsidiary, divi20 sion, or other major business unit of the em21 ployer are generally not eligible to participate in 

22 any such qualifying plan or arrangement, and 

23 ‘‘(C) the number of employees of the em24 ployer described in subparagraph (B) for a cal25 endar year is— 


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1 ‘‘(i) at least 50, and 

2 ‘‘(ii) at least 10 percent of the em3 ployees of the employer (other than exclud4 able employees), 

5 then, for purposes of this section, the employer shall 

6 be treated as a covered employer with respect to 

7 such employees (other than excluded employees) for 

8 the calendar year, and such employees (other than 

9 excluded employees) shall be treated as qualifying 

10 employees. 

11 ‘‘(3) EXCLUDED EMPLOYEES.— 

12 ‘‘(A) IN GENERAL.—The term ‘excluded 

13 employee’ means an employee of the employer 

14 who is an excludable employee and who is in a 

15 class or category that the employer elects to ex16 clude from treatment as qualifying employees. 

17 ‘‘(B) EXCLUDABLE EMPLOYEE.—The term 

18 ‘excludable employee’ means— 

19 ‘‘(i) any employee described in section 

20 410(b)(3), 

21 ‘‘(ii) any employee who has not at22 tained the age of 18 before the first day of 

23 the calendar year, 


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1 ‘‘(iii) any employee who has not com2 pleted at least 3 months of service with the 

3 employer, 

4 ‘‘(iv) in the case of an employer that 

5 maintains a qualifying plan or arrange6 ment which excludes employees who have 

7 not satisfied the minimum age and service 

8 requirements for participation in the plan, 

9 any employee who has not satisfied such 

10 requirements, 

11 ‘‘(v) in the case of an employer that 

12 maintains a section 403(b) annuity con13 tract (including a custodial account or re14 tirement income account), any employee 

15 who is permitted to be excluded from any 

16 salary reduction arrangement under the 

17 contract pursuant to section 403(b)(12), 

18 ‘‘(vi) in the case of an employer that 

19 maintains an arrangement described in 

20 section 408(p), any employee who is not 

21 required to be eligible to participate in the 

22 arrangement under section 408(p)(4), and 

23 ‘‘(vii) in the case of an employer that 

24 maintains a simplified employee pension 

25 described in section 408(k), any employee 


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1 who is permitted to be excluded from par2 ticipation under section 408(k)(2). 

3 ‘‘(4) GUIDANCE.—The Secretary shall issue 

4 regulations or other guidance to carry out this sub5 section, including— 

6 ‘‘(A) guidelines for determining the classes 

7 or categories of employees to be covered by an 

8 automatic IRA arrangement, 

9 ‘‘(B) if an employer excludes employees 

10 from the automatic IRA arrangement, guide11 lines providing that the employer shall specify 

12 the classification or categories of employees who 

13 are so excluded, and 

14 ‘‘(C) rules to prevent avoidance of the re15 quirements of this section. 

16 ‘‘(d) AUTOMATIC IRA ARRANGEMENT.—For pur17 poses of this section— 

18 ‘‘(1) IN GENERAL.—The term ‘automatic IRA 

19 arrangement’ means an arrangement of an employer 

20 (determined without regard to whether the employer 

21 is required to maintain the arrangement)— 

22 ‘‘(A) under which a qualifying employee— 

23 ‘‘(i) may elect— 

24 ‘‘(I) to contribute to an indi25 vidual retirement plan, or to purchase 


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1 a qualifying retirement bond, by hav2 ing the employer deposit payroll de3 duction amounts or make other peri4 odic direct deposits (including elec5 tronic payments) to the plan or invest 

6 such amounts in such qualifying re7 tirement bonds, or 

8 ‘‘(II) to have such payments paid 

9 to the employee directly in cash, 

10 ‘‘(ii) is treated as having made the 

11 election under clause (i)(I) in the amount 

12 specified in paragraph (5) until the indi13 vidual specifically elects not to have such 

14 contributions or purchases made (or spe15 cifically elects to have such contributions 

16 or purchases made at a different percent17 age or in a different amount), and 

18 ‘‘(iii) may elect to modify the manner 

19 in which such amounts are invested for 

20 such year, 

21 ‘‘(B) which meets the administrative re22 quirements of paragraph (3), including the no23 tice requirement of paragraph (3)(C), and 


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1 ‘‘(C) which does not charge unreasonable 

2 additional fees solely on the basis that the bal3 ance in an automatic IRA is small. 

4 ‘‘(2) EMPLOYER’S OPTION TO OBTAIN AFFIRMA5 TIVE ELECTIONS FROM EMPLOYEES INSTEAD OF

6 AUTOMATIC ENROLLMENT.—As an alternative to 

7 automatic enrollment, an employer may choose to 

8 comply with paragraph (1)(A)(ii) by notifying em9 ployees that the employer wishes to obtain from each 

10 qualifying employee an affirmative election either to 

11 contribute or not to contribute to an automatic IRA, 

12 provided that any qualifying employee who fails to 

13 make such an election is treated in the manner pro14 vided under paragraph (1)(A)(ii). 

15 ‘‘(3) ADMINISTRATIVE REQUIREMENTS.— 

16 ‘‘(A) PAYMENTS.—The requirements of 

17 this paragraph are met with respect to any 

18 automatic IRA arrangement if the employer 

19 makes the payments elected or treated as elect20 ed under paragraph (1)(A)— 

21 ‘‘(i) on or before the last day of the 

22 month following the month in which the 

23 compensation otherwise would have been 

24 payable to the employee in cash, 


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1 ‘‘(ii) before such later deadline pre2 scribed by the Secretary for making such 

3 payments, but not later than the due date 

4 for the deposit of tax required to be de5 ducted and withheld under chapter 24 (re6 lating to collection of income tax at source 

7 on wages) for the payroll period to which 

8 such payments relate, or 

9 ‘‘(iii) as early as administratively 

10 practicable. 

11 ‘‘(B) TERMINATION OF EMPLOYEE PAR12 TICIPATION.—Subject to a requirement for rea13 sonable notice, an employee may elect to termi14 nate participation in the arrangement at any 

15 time during a calendar year, except that if an 

16 employee so terminates, the arrangement may 

17 provide that the employee may not elect to re18 sume participation until the beginning of the 

19 next calendar year. 

20 ‘‘(C) NOTICE OF ELECTION PERIOD.—The 

21 requirements of this paragraph shall not be 

22 treated as met with respect to any year unless 

23 the employer notifies each employee eligible to 

24 participate, within a reasonable period of time 

25 before the 30th day before the beginning of 


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1 such year (and, for the first year the employee 

2 is so eligible, the 30th day before the first day 

3 such employee is so eligible), of— 

4 ‘‘(i) the payments that may be elected 

5 or treated as elected under paragraph 

6 (1)(A), 

7 ‘‘(ii) the opportunity to make the elec8 tion to terminate participation in the ar9 rangement under subparagraph (B), 

10 ‘‘(iii) the opportunity to make the 

11 election under paragraph (1)(A)(ii) to have 

12 contributions or purchases made at a dif13 ferent percentage or in a different amount, 

14 and 

15 ‘‘(iv) the opportunity under paragraph 

16 (1)(A)(iii) to modify the manner in which 

17 such amounts are invested for such year. 

18 ‘‘(D) INVESTMENT OPTIONS.—The require19 ments of this paragraph shall not be treated as 

20 met with respect to any year unless an em21 ployee electing to have contributions made to an 

22 individual retirement plan is provided with the 

23 option to choose among all investment options 

24 described in subparagraphs (B), (C), (D), and 

25 (E) of paragraph (6). 


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1 ‘‘(4) DEFAULT INVESTMENTS.—If an employee 

2 is treated under clause (ii) of paragraph (1)(A) as 

3 having made an election to participate in an auto4 matic IRA arrangement— 

5 ‘‘(A) the employee shall be deemed to have 

6 made an election to make contributions and 

7 payments in the amount determined under such 

8 clause, and 

9 ‘‘(B) such contributions shall— 

10 ‘‘(i) be transferred to an individual re11 tirement plan of the designated trustee or 

12 issuer, but only if the contributions are in13 vested as provided in paragraph (6), or 

14 ‘‘(ii) be applied toward the purchase 

15 of a qualifying retirement bond. 

16 ‘‘(5) AMOUNT OF CONTRIBUTIONS AND PAY17 MENTS.— 

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

19 in this paragraph with respect to any employee 

20 is— 

21 ‘‘(i) 3 percent of the compensation of 

22 the employee, or 

23 ‘‘(ii) such other percentage of com24 pensation as is specified in regulations preVerDate Sep 11 2014 00:29 Sep 28, 2017 Jkt 069200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S1861.IS S1861

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1 scribed by the Secretary which is not less 

2 than 2 percent or more than 6 percent. 

3 ‘‘(B) AUTHORITY TO PROVIDE FOR PERI4 ODIC INCREASES.—In the case of qualifying em5 ployees under an automatic IRA arrangement 

6 for 2 or more consecutive years, the Secretary 

7 may by regulation provide for periodic (not 

8 more frequent than annual) increases in the 

9 percentage of compensation an employee is 

10 deemed to have elected under subparagraph 

11 (A). The considerations the Secretary shall take 

12 into account in issuing any regulations under 

13 this subparagraph and subparagraph (A) shall 

14 include the potential effects on lower-income 

15 employees as well as on adequacy of savings. 

16 ‘‘(C) PERMITTED ADDITIONAL PROCE17 DURES TO LIMIT CONTRIBUTIONS.—An em18 ployer— 

19 ‘‘(i) shall have no responsibility for 

20 any calendar year for determining whether, 

21 or ensuring that, the contributions with re22 spect to any employee do not exceed the 

23 deductible amount in effect for taxable 

24 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 ‘‘(6) REQUIRED INVESTMENTS.— 

13 ‘‘(A) IN GENERAL.—Amounts contributed 

14 under paragraph (4)(B)(i) shall be invested 

15 only in the class of assets or funds described in 

16 subparagraph (B) unless the employee elects a 

17 class of assets or funds described in subpara18 graph (C), (D), or (E). 

19 ‘‘(B) TARGET DATE OR LIFECYCLE OP20 TION.—The class of assets or funds described 

21 in this subparagraph is the class of assets or 

22 funds that constitutes a qualified default invest23 ment alternative under section 2550.404c– 

24 5(e)(4)(i) of title 29, Code of Federal Regula25 tions. 


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1 ‘‘(C) PRINCIPAL PRESERVATION.—The 

2 class of assets or funds described in this sub3 paragraph is the class of assets or funds that 

4 is designed to protect the principal of the indi5 vidual on an ongoing basis, including passbook 

6 savings, certificates of deposit, insurance con7 tracts, mutual funds, United States savings 

8 bonds (which may be indexed for inflation), and 

9 similar assets specified in regulations. 

10 ‘‘(D) GUARANTEED LIFETIME INCOME OP11 TION OR EQUIVALENT.—The class of assets or 

12 funds described in this subparagraph is the 

13 class of assets or funds that is designed to pro14 vide an employee with the right to elect to re15 ceive distributions as a defined level of income 

16 annually (or more frequently) for at least the 

17 remainder of the life of the employee or the 

18 joint lives of the employee and the employee’s 

19 designated beneficiary. 

20 ‘‘(E) OTHER.—Any other class of assets or 

21 funds determined by the Secretary to be a 

22 qualified investment for purposes of this sec23 tion. 

24 ‘‘(7) QUALIFYING RETIREMENT BOND.—For 

25 purposes of this section— 


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1 ‘‘(A) IN GENERAL.—The term ‘qualifying 

2 retirement bond’ means a bond issued under 

3 chapter 31 of title 31, United States Code, 

4 which by its terms, or by regulations prescribed 

5 by the Secretary under such chapter— 

6 ‘‘(i) provides for interest to be cred7 ited at rates that take into account the ex8 pected duration of the funds invested in 

9 such bonds and at rates determined or ad10 justed in a manner and with sufficient fre11 quency to provide substantial protection 

12 from inflation, 

13 ‘‘(ii) is not transferable, and 

14 ‘‘(iii) is designed for investment for 

15 retirement under automatic IRA arrange16 ments or other savings vehicles. 

17 ‘‘(B) INDIVIDUAL RETIREMENT PLAN

18 RULES APPLICABLE.—The provisions of this 

19 title applicable to an individual retirement plan 

20 (as defined in section 7701(a)(37)), including 

21 provisions relating to contributions, holding and 

22 distributions, shall apply to a qualifying retire23 ment bond, except as determined by the Sec24 retary. 


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1 ‘‘(C) ANNUAL STATEMENT.—As soon as 

2 practicable after the close of each calendar 

3 year, the Secretary shall make available an an4 nual statement to each participant on behalf of 

5 whom qualifying retirement bonds have been 

6 purchased, setting forth— 

7 ‘‘(i) payments made by or on behalf of 

8 the participant for such bonds during such 

9 calendar year, 

10 ‘‘(ii) amounts earned by any such 

11 bonds, whether purchased during such year 

12 or during a prior year, during such cal13 endar year, 

14 ‘‘(iii) the value of the participant’s ac15 count with respect to such bonds as of the 

16 close of such calendar year, 

17 ‘‘(iv) the importance of diversifying 

18 retirement savings, 

19 ‘‘(v) the benefits of a well-balanced 

20 and diversified investment portfolio, 

21 ‘‘(vi) a notice of the internet website 

22 of the Department of Labor for sources of 

23 information on individual investing and di24 versification, 


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1 ‘‘(vii) the procedures for redeeming a 

2 qualifying retirement bond and directly 

3 transferring the redeemed amount into an 

4 individual retirement plan, 

5 ‘‘(viii) other factors affecting retire6 ment savings decisions, and 

7 ‘‘(ix) such other information as the 

8 Secretary determines necessary or appro9 priate. 

10 ‘‘(8) TREATMENT AS ROTH IRA.—A qualifying 

11 employee for whom an automatic IRA is established 

12 under paragraph (1) may elect, at such time and in 

13 such manner and form as the Secretary may pre14 scribe but not later than the due date of the return 

15 for the taxable year in which such automatic IRA is 

16 established, whether to treat the individual retire17 ment plan as described, or not described, in section 

18 408A. If no such election is made, the plan shall be 

19 treated as described in section 408A and shall meet 

20 the requirements of section 408A (including any ap21 propriate adjustment or conversion as may be pro22 vided by the Secretary). 

23 ‘‘(e) TREATMENT OF CONTRIBUTIONS.— 

24 ‘‘(1) IN GENERAL.—A contribution to an indi25 vidual retirement plan or purchase of a retirement 


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1 bond on behalf of an employee under a qualifying 

2 automatic IRA arrangement shall be treated for pur3 poses of this title as if it had been made directly by 

4 the employee, including for purposes of limitations 

5 on contributions to individual retirement plans. 

6 ‘‘(2) COORDINATION WITH WITHHOLDING.— 

7 The Secretary shall modify the withholding exemp8 tion certificate under section 3402(f) so that, in the 

9 case of any qualifying employee covered under an 

10 automatic IRA arrangement, any notice and election 

11 requirements with respect to the arrangement may 

12 be met through the use of an attachment to such 

13 certificate or other modifications of the withholding 

14 exemption procedures. 

15 ‘‘(3) INDIVIDUAL RETIREMENT PLAN RULES AP16 PLICABLE.—The provisions of this title applicable to 

17 an individual retirement plan (as defined in section 

18 7701(a)(37)), including provisions relating to con19 tributions, holding and distributions, shall apply to 

20 a qualifying retirement bond, except as determined 

21 by the Secretary. 

22 ‘‘(4) ROLLOVER FROM BONDS TO IRA.—The 

23 Secretary shall provide for procedures by which an 

24 individual may periodically elect to transfer quali25 fying retirement bonds (with their proceeds) held by 


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1 the individual to an individual retirement account. 

2 Any such transfer shall be treated as a rollover con3 tribution for purposes of section 408(d)(3) (other 

4 than subparagraph (B) thereof). 

5 ‘‘(f) MODEL NOTICE.—The Secretary, in coordina6 tion with the Director of the Consumer Financial Protec7 tion Bureau, shall— 

8 ‘‘(1) provide a model notice, written in a man9 ner calculated to be understandable to the average 

10 worker, that is simple for employers to use— 

11 ‘‘(A) to notify employees of the require12 ment under section 4980J for the employer to 

13 provide certain employees with the opportunity 

14 to participate in a qualifying automatic IRA ar15 rangement, and 

16 ‘‘(B) to satisfy the requirements of sub17 section (d)(3)(C), 

18 ‘‘(2) provide uniform forms for enrollment, in19 cluding automatic enrollment, in an automatic IRA 

20 arrangement, and 

21 ‘‘(3) establish a website or other electronic 

22 means that small employers can access and use to 

23 obtain information on automatic IRA arrangements 

24 and to obtain required notices and forms. 


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1 The information referred to in paragraph (3) shall be pro2 vided in a manner designed to assist employers and pro3 viders by facilitating the identification by employers of pri4 vate-sector providers of individual retirement plans and 

5 associated investment options that are appropriate for use 

6 in automatic IRA arrangements. 

7 ‘‘(g) CROSS REFERENCE.—For provision preempting 

8 conflicting State laws, see section 2(j) of the Automatic 

9 IRA Act of 2017.’’. 

10 (b) MANDATORY TRANSFERS.—Section 

11 401(a)(31)(B)(i) of the Internal Revenue Code of 1986 

12 is amended— 

13 (1) by inserting ‘‘(including a plan established 

14 through a qualifying automatic IRA arrangement 

15 (as defined in section 408B))’’ after ‘‘individual re16 tirement plan’’ each place it appears, and 

17 (2) by adding at the end the following new sen18 tence: ‘‘Any amount so transferred (and any earn19 ings thereon) shall be invested only in investments 

20 described in section 408B(d)(6).’’. 

21 (c) PENALTY FOR FAILURE TO TIMELY REMIT CON22 TRIBUTIONS TO AUTOMATIC IRA ARRANGEMENTS.—Sec23 tion 4975(c) of the Internal Revenue Code of 1986 is 

24 amended by adding at the end the following new para25 graph: 


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1 ‘‘(7) SPECIAL RULE FOR QUALIFYING AUTO2 MATIC IRA ARRANGEMENTS.—For purposes of para3 graph (1), if an employer is required under a quali4 fying automatic IRA arrangement under section 

5 408B to deposit amounts withheld from an employ6 ee’s compensation into an individual retirement ac7 count or toward the purchase of a qualifying retire8 ment bond (as defined in section 408B(d)(7)) but 

9 fails to do so within the time prescribed under sec10 tion 408B(d)(3)(A), such amounts shall be treated 

11 as assets of the individual retirement account.’’. 

12 (d) COORDINATION WITH EMPLOYEE RETIREMENT

13 INCOME SECURITY ACT OF 1974.— 

14 (1) EXEMPTION.— 

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

16 Employee Retirement Income Security Act of 

17 1974 (29 U.S.C. 1002(2)) is amended— 

18 (i) by inserting ‘‘or (C)’’ after ‘‘sub19 paragraph (B)’’ in subparagraph (A), and 

20 (ii) by adding at the end the following 

21 new subparagraph: 

22 ‘‘(C) A qualifying automatic IRA arrange23 ment described in section 408B of the Internal 

24 Revenue Code of 1986 shall not be treated as 

25 an employee pension benefit plan or pension 


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1 plan if, under the arrangement, contributions 

2 are to be made to an individual retirement ac3 count the provider of which is included in the 

4 website list established under section 

5 408B(f)(3) of such Code, are to be made to an 

6 individual retirement plan designated by the 

7 employee, or are to be invested in qualifying re8 tirement bonds (as defined in section 

9 408B(d)(7)).’’. 

10 (B) CUSTOMER IDENTIFICATION PRO11 GRAM.—Notwithstanding the amendment made 

12 by subparagraph (A), an individual retirement 

13 plan established pursuant to an automatic IRA 

14 arrangement described in section 408B(d) of 

15 the Internal Revenue Code of 1986 shall, for 

16 purposes of any customer identification pro17 gram established under section 5318(l) of title 

18 31, United States Code, be treated as an ac19 count opened for the purpose of participating in 

20 an employee benefit plan established under the 

21 Employee Retirement Income Security Act of 

22 1974. 

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

24 such Act is amended by adding at the end the fol25 lowing new paragraph: 


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1 ‘‘(6) In the case of an individual retirement ac2 count opened under a qualifying automatic IRA ar3 rangement under section 408B of such Code that is 

4 not exempt under section 3(2)(C), a participant or 

5 beneficiary shall, for purposes of paragraph (1), be 

6 treated as exercising control over the assets in the 

7 account on and after the 7th day after notice has 

8 been given to an employee that such account has 

9 been established on behalf of the employee. No re10 ports, other than those required under section 

11 101(g), shall be required with respect to an account 

12 opened under a qualifying automatic IRA arrange13 ment under section 408B of such Code.’’. 

14 (e) NOTICE OF AVAILABILITY OF INVESTMENT

15 GUIDELINES.— 

16 (1) IN GENERAL.—Section 408(i) of the Inter17 nal Revenue Code of 1986 is amended by adding at 

18 the end the following new sentence: ‘‘Any report fur19 nished under paragraph (2) to an individual shall in20 clude notice of the Internet website of the Depart21 ment of Labor for sources of information on indi22 vidual investing and diversification.’’. 

23 (2) UPDATED INFORMATION.—Such informa24 tion shall be modified (or updated) by the Secretary 

25 of Labor in consultation with the Secretary of the 


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1 Treasury and the Chairman of the Securities and 

2 Exchange Commission to address needed changes 

3 due to the creation of automatic IRAs. 

4 (f) FAILURE TO PROVIDE QUALIFYING AUTOMATIC

5 IRA ARRANGEMENTS.—Chapter 43 of the Internal Rev6 enue Code of 1986 is amended by adding at the end the 

7 following new section: 

8 ‘‘SEC. 4980J. REQUIREMENTS FOR COVERED EMPLOYERS 

9 TO PROVIDE QUALIFYING AUTOMATIC IRA 

10 ARRANGEMENTS. 

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

12 tax on any failure by a covered employer (as defined in 

13 section 408B) to maintain a qualifying IRA arrangement 

14 (as defined in such section), and to meet the requirements 

15 under such arrangement, for a calendar year. 

16 ‘‘(b) AMOUNT.— 

17 ‘‘(1) IN GENERAL.—The amount of the tax im18 posed by subsection (a) on any failure for any cal19 endar year shall be $100 with respect to each em20 ployee to whom such failure relates. 

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

22 DISCOVERED AND REASONABLE DILIGENCE EXER23 CISED.—No tax shall be imposed by subsection (a) 

24 on any failure during any period for which it is es25 tablished to the satisfaction of the Secretary that the 


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1 employer subject to liability for the tax did not know 

2 that the failure existed and exercised reasonable dili3 gence to maintain a qualifying IRA arrangement 

4 and to meet the requirements under such arrange5 ment. 

6 ‘‘(3) TAX NOT TO APPLY TO FAILURES COR7 RECTED WITHIN 90 DAYS.—No tax shall be imposed 

8 by subsection (a) on any failure if— 

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

10 the tax under subsection (a) exercised reason11 able diligence to maintain a qualifying IRA ar12 rangement and to meet the requirements under 

13 such arrangement, and 

14 ‘‘(B) the employer provides a qualifying 

15 automatic IRA arrangement described in sec16 tion 408B to each qualifying employee (as de17 fined in section 408B) by the end of the 90-day 

18 period beginning on the first date the employer 

19 knew, or exercising reasonable diligence would 

20 have known, that such failure existed. 

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

22 failure which is due to reasonable cause and not to 

23 willful neglect, the Secretary may waive part or all 

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


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1 that the payment of such tax would be excessive or 

2 otherwise inequitable relative to the failure involved. 

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

4 prescribe and implement procedures for obtaining con5 firmation of whether employers are subject to the tax im6 posed by subsection (a). The Secretary, in the Secretary’s 

7 discretion, may prescribe that the confirmation shall be 

8 obtained on an annual or less frequent basis, and may use 

9 for this purpose the annual report or quarterly report for 

10 employment taxes, or such other means as the Secretary 

11 may deem advisable.’’. 

12 (g) WAIVER OF EARLY WITHDRAWAL PENALTY FOR

13 CERTAIN DISTRIBUTIONS FOLLOWING INITIAL ELECTION

14 TO PARTICIPATE IN AUTOMATIC IRA ARRANGEMENT.— 

15 Section 72(t) of the Internal Revenue Code of 1986 is 

16 amended by adding at the end the following new para17 graph: 

18 ‘‘(11) DISTRIBUTION FOLLOWING INITIAL

19 ELECTION TO PARTICIPATE IN AUTOMATIC IRA AR20 RANGEMENT.—Paragraph (1) shall not apply in the 

21 case of a distribution to a qualifying employee made 

22 not later than 90 days after the initial election 

23 under section 408B(d)(1)(A)(ii).’’. 

24 (h) BANKRUPTCY.—Section 522 of title 11, United 

25 States Code, is amended— 


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1 (1) in subsection (d)(12), by inserting ‘‘, 408B’’ 

2 after ‘‘408A’’, and 

3 (2) in subsection (n), by inserting ‘‘, or in a 

4 qualifying automatic IRA arrangement described in 

5 section 408B’’ after ‘‘section 408(p) of such Code’’. 

6 (i) CONFORMING AMENDMENTS.— 

7 (1) The table of sections for subpart A of part 

8 I of subchapter D of chapter 1 of the Internal Rev9 enue Code of 1986 is amended by inserting after the 

10 item relating to section 408A the following new 

11 item: 

‘‘Sec. 408B. Qualifying automatic IRA arrangements.’’. 

12 (2) The table of sections for chapter 43 of such 

13 Act is amended by adding at the end the following 

14 new item: 

‘‘Sec. 4980J. Requirements for covered employers to provide qualifying automatic IRA arrangements.’’. 

15 (j) PREEMPTION OF CONFLICTING STATE LAWS.— 

16 The amendments made by this section shall supersede any 

17 law of a State that would directly or indirectly prohibit 

18 or restrict the establishment or operation of a qualifying 

19 automatic IRA arrangement meeting the requirements of 

20 section 408B of the Internal Revenue Code of 1986. Noth21 ing in such amendments shall be construed to impair or 

22 supersede any State law to the extent it provides a remedy 

23 for the failure to make payroll deposit payments under any 


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1 such automatic IRA arrangement within the period re2 quired under such section 408B. 

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

4 this section shall apply to calendar years beginning after 

5 December 31, 2018. 

6 (l) REGULATIONS.—Not later than 12 months after 

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

8 the Treasury, in coordination with the Secretary of Labor, 

9 shall issue guidance defining the class of guaranteed life10 time income or equivalent arrangements which meet the 

11 requirements of section 408B(d)(5)(E) of the Internal 

12 Revenue Code of 1986, as added by this section. 

13 SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING 

14 QUALIFYING AUTOMATIC IRA ARRANGE15 MENTS. 

16 (a) IN GENERAL.—Subpart D of part IV of sub17 chapter A of chapter 1 of the Internal Revenue Code of 

18 1986 is amended by adding at the end the following new 

19 section: 

20 ‘‘SEC. 45S. SMALL EMPLOYER AUTOMATIC IRA ARRANGE21 MENT. 

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

23 in the case of an eligible employer maintaining a quali24 fying automatic IRA arrangement meeting the require25 ments of section 408B (without regard to whether the emVerDate Sep 11 2014 23:10 Sep 28, 2017 Jkt 069200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\S1861.IS S1861

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1 ployer is a covered employer), the small employer auto2 matic IRA arrangement credit determined under this sec3 tion for any taxable year in the credit period is the amount 

4 determined under subsection (b). 

5 ‘‘(b) AMOUNT OF CREDIT.— 

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

7 determined under this section for any taxable year 

8 with respect to an eligible employer shall be the sum 

9 of— 

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

11 qualifying employees (within the meaning of 

12 section 408B(c)) for whom contributions are 

13 made under the qualifying automatic IRA ar14 rangement referred to in subsection (a) for the 

15 calendar year in which the taxable year begins, 

16 plus 

17 ‘‘(B) the amount determined under para18 graph (2) with respect to the taxable year. 

19 ‘‘(2) AMOUNT DETERMINED.—The amount de20 termined under this paragraph is— 

21 ‘‘(A) $500 in the case of the taxable year 

22 which begins in the first calendar year in which 

23 the eligible employer maintains the qualifying 

24 automatic IRA arrangement, 


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1 ‘‘(B) $250 in the case of the taxable year 

2 which begins in the second calendar year in 

3 which the eligible employer maintains such ar4 rangement, and 

5 ‘‘(C) $0 thereafter. 

6 ‘‘(3) LIMITATION.—The amount determined 

7 under paragraph (1)(A) for any taxable year shall 

8 not exceed $250. 

9 ‘‘(4) COORDINATION WITH SMALL EMPLOYER

10 STARTUP CREDIT.— 

11 ‘‘(A) IN GENERAL.—No credit shall be al12 lowed under this section to the employer for 

13 any taxable year if a credit is determined under 

14 section 45E with respect to the employer for 

15 the taxable year. 

16 ‘‘(B) EXTENSION OF CREDIT.—If the eligi17 ble employer maintains a qualifying automatic 

18 IRA arrangement meeting the requirements of 

19 section 408B (without regard to whether the 

20 employer is a covered employer) with respect to 

21 any of the first 3 calendar years for which the 

22 employer could adopt such an arrangement, and 

23 subsequently adopts an eligible employer plan 

24 for its employees for any of those years which 

25 it maintains throughout such 3-calendar-year 


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1 period, then section 45E(b)(1) shall be applied 

2 with respect to the eligible employer by sub3 stituting ‘3 taxable years’ for ‘2 taxable years’. 

4 ‘‘(c) DEFINITIONS.—For purposes of this section— 

5 ‘‘(1) ELIGIBLE EMPLOYER.—The term ‘eligible 

6 employer’ means, with respect to the calendar year 

7 in which the taxable year begins, an employer 

8 which— 

9 ‘‘(A) maintains a qualifying automatic IRA 

10 arrangement meeting the requirements of sec11 tion 408B (without regard to whether the em12 ployer is a covered employer), 

13 ‘‘(B) on each day during the preceding cal14 endar year, had no more than 100 employees, 

15 and 

16 ‘‘(C) did not maintain a qualifying plan or 

17 arrangement (described in section 408B(b)) 

18 during the portion of the calendar year pre19 ceding the adoption of the qualifying automatic 

20 IRA arrangement and the 2 preceding calendar 

21 years. 

22 ‘‘(2) CREDIT PERIOD.—The term ‘credit period’ 

23 means the first 6 calendar years in which the eligible 

24 employer maintains the qualifying automatic IRA 

25 arrangement. 


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

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

3 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI4 NESS CREDIT.—Section 38(b) of the Internal Revenue 

5 Code of 1986 is amended by striking ‘‘plus’’ at the end 

6 of paragraph (35), by striking the period at the end of 

7 paragraph (36) and inserting ‘‘, plus’’, and by adding at 

8 the end the following new paragraph: 

9 ‘‘(37) the small employer automatic IRA ar10 rangement credit determined under section 45S(a).’’. 

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

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

13 of the Internal Revenue Code of 1986 is amended by add14 ing at the end the following new item: 

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

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2018. 

18 SEC. 4. INCREASE IN CREDIT LIMITATION FOR SMALL EM19 PLOYER PENSION PLAN STARTUP COSTS. 

20 (a) IN GENERAL.—Section 45E(b)(1) of the Internal 

21 Revenue Code of 1986 is amended to read as follows: 

22 ‘‘(1) for the first credit year and each of the 2 

23 taxable years immediately following the first credit 

24 year, the greater of— 

25 ‘‘(A) $500, or 


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1 ‘‘(B) the lesser of— 

2 ‘‘(i) $250 for each employee of the eli3 gible employer who is not a highly com4 pensated employee (as defined in section 

5 415(q)) and who is eligible to participate 

6 in the eligible employer plan maintained by 

7 the eligible employer, or 

8 ‘‘(ii) $5,000, and’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to taxable years beginning after 

11 December 31, 2017. 

Æ 


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