I 

114TH CONGRESS 

1ST SESSION H. R. 506 

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 HOUSE OF REPRESENTATIVES 

JANUARY 22, 2015 

Mr. NEAL introduced the following bill; which was referred to the Committee 

on Ways and Means, and in addition to the Committee on Education and 

the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

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 2015’’. 


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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

7 SEC. 2. EMPLOYEES NOT COVERED BY QUALIFYING RE8 TIREMENT PLANS OR ARRANGEMENTS ENTI9 TLED TO PARTICIPATE IN AUTOMATIC IRA 

10 ARRANGEMENTS. 

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

12 D of chapter 1 (relating to pension, profit-sharing, stock 

13 bonus plans, etc.) is amended by inserting after section 

14 408A the following new section: 

15 ‘‘SEC. 408B. RIGHT TO AUTOMATIC IRA ARRANGEMENTS AT 

16 WORK. 

17 ‘‘(a) REQUIREMENT TO PROVIDE AUTOMATIC IRA 

18 ARRANGEMENT.—Each covered employer shall make 

19 available to each qualifying employee of the employer for 

20 the calendar year an automatic IRA arrangement. 

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

22 section— 

23 ‘‘(1) IN GENERAL.—Except as otherwise pro24 vided in this subsection or subsection (c)(2), the 

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


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1 year, an employer which does not maintain a quali2 fying plan or arrangement described in section 

3 219(g)(5) for the calendar year. 

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

5 arrangement shall not be taken into account for pur6 poses of paragraph (1) if— 

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

8 of the first day of the preceding calendar year, 

9 or 

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

11 under which the only contributions are discre12 tionary on the part of the employer or other 

13 plan sponsor, no employer contribution has 

14 been made to the plan or arrangement for the 

15 2-plan-year period ending with the last plan 

16 year ending in the second preceding calendar 

17 year and it is not reasonable to assume that an 

18 employer contribution will be made for the last 

19 plan year ending in the preceding calendar 

20 year. 

21 ‘‘(3) EXCEPTION FOR CERTAIN SMALL AND

22 NEW EMPLOYERS.— 

23 ‘‘(A) IN GENERAL.—The term ‘covered em24 ployer’ does not include an employer for a cal25 endar year if the employer either— 


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1 ‘‘(i) did not employ more than 10 em2 ployees who received at least $5,000 of 

3 compensation (as defined in section 

4 3401(a)) from the employer for the pre5 ceding calendar year, 

6 ‘‘(ii) did not normally employ more 

7 than 10 employees on a typical business 

8 day of the preceding calendar year, or 

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

10 during the calendar year and the preceding 

11 calendar year. 

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

13 the number of employees for purposes of sub14 paragraph (A)— 

15 ‘‘(i) rules consistent with any rules 

16 applicable in determining the number of 

17 employees for purposes of section 

18 408(p)(2)(C) and section 4980B(d) shall 

19 apply, 

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

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

22 shall be treated as 1 individual, and 

23 ‘‘(iii) any reference to an employer 

24 shall include a reference to any predecessor 

25 employer. 


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1 ‘‘(4) EXCEPTION FOR GOVERNMENTS AND

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

3 include— 

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

5 section 414(d), or 

6 ‘‘(B) a church or a convention or associa7 tion of churches which is exempt from tax 

8 under section 501. 

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

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

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

12 shall be treated as a single employer. 

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

14 section— 

15 ‘‘(1) IN GENERAL.—The term ‘qualifying em16 ployee’ means any employee of the employer who is 

17 not an excluded employee. 

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

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

20 qualifying plans or arrangements described in 

21 section 219(g)(5), and 

22 ‘‘(B) the employees of a subsidiary, divi23 sion, or other major business unit are generally 

24 not eligible to participate in any such qualifying 

25 plan or arrangement, 


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

2 be treated as a covered employer with respect to 

3 such employees (other than excluded employees), 

4 and such employees (other than excluded employees) 

5 shall be treated as qualifying employees, but only if 

6 there are 50 or more ineligible employees of such 

7 subsidiary, division or other major business unit con8 stituting at least 10 percent of the employees of the 

9 employer (other than excludable employees). 

10 ‘‘(3) EXCLUDED EMPLOYEES.— 

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

12 employee’ means an employee of the employer 

13 who is an excludable employee and who is in a 

14 class or category that the employer excludes 

15 from treatment as qualifying employees. 

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

17 ‘excludable employee’ means— 

18 ‘‘(i) any employee described in section 

19 410(b)(3), 

20 ‘‘(ii) any employee who has not at21 tained the age of 18 before the beginning 

22 of the calendar year, 

23 ‘‘(iii) any employee who has not com24 pleted at least 3 months of service with the 

25 employer, 


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

2 maintains a qualifying plan or arrange3 ment which excludes employees who have 

4 not satisfied the minimum age and service 

5 requirements for participation in the plan, 

6 any employee who has not satisfied such 

7 requirements, 

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

9 maintains a section 403(b) annuity con10 tract (including a custodial account or re11 tirement income account), any employee 

12 who is permitted to be excluded from any 

13 salary reduction arrangement under the 

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

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

16 maintains an arrangement described in 

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

18 required to be eligible to participate in the 

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

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

21 maintains a simplified employee pension 

22 described in section 408(k), any employee 

23 who is permitted to be excluded from par24 ticipation under section 408(k)(2). 


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

2 regulations or other guidance to carry out this sub3 section, including— 

4 ‘‘(A) guidelines for determining the classes 

5 or categories of employees to be covered by an 

6 automatic IRA arrangement, 

7 ‘‘(B) if an employer excludes employees 

8 from the automatic IRA arrangement, guide9 lines providing that the employer shall specify 

10 the classification or categories of employees who 

11 are so excluded, and 

12 ‘‘(C) rules to prevent avoidance of the re13 quirements of this section. 

14 ‘‘(d) AUTOMATIC IRA ARRANGEMENT.—For pur15 poses of this section— 

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

17 arrangement’ means an arrangement of an employer 

18 (determined without regard to whether the employer 

19 is required to maintain the arrangement)— 

20 ‘‘(A) which covers each qualifying employee 

21 of the covered employer for the calendar year, 

22 ‘‘(B) 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 qualified retirement bond on behalf 

2 of the employee, by having the em3 ployer deposit payroll deduction 

4 amounts or make other periodic direct 

5 deposits (including electronic pay6 ments) to the plan or to be invested in 

7 retirement bonds (whether to the Sec8 retary of the Treasury or to a des9 ignated trustee or other agent for that 

10 purpose), or 

11 ‘‘(II) to have such payments paid 

12 to the employee directly in cash, 

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

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

15 specified in paragraph (4) until the indi16 vidual specifically elects not to have such 

17 contributions or purchases made (or spe18 cifically elects to have such contributions 

19 or purchases made at a different percent20 age or in a different amount), and 

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

22 in which such amounts are invested for 

23 such year, 


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1 ‘‘(C) which meets the administrative re2 quirements of paragraph (2), including the no3 tice requirement of paragraph (2)(C), and 

4 ‘‘(D) which does not charge unreasonable 

5 additional fees solely on the basis that the bal6 ance in an automatic IRA is small. 

7 ‘‘(2) ADMINISTRATIVE REQUIREMENTS.— 

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

9 this paragraph are met with respect to any 

10 automatic IRA arrangement if the employer 

11 makes the payments elected or treated as elect12 ed under paragraph (1)(B)— 

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

14 month following the month in which the 

15 compensation otherwise would have been 

16 payable to the employee in cash, or 

17 ‘‘(ii) before such later deadline pre18 scribed by the Secretary for making such 

19 payments, but not later than the due date 

20 for the deposit of tax required to be de21 ducted and withheld under chapter 24 (re22 lating to collection of income tax at source 

23 on wages) for the payroll period to which 

24 such payments relate. 


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1 ‘‘(B) TERMINATION OF EMPLOYEE PAR2 TICIPATION.—Subject to a requirement for rea3 sonable notice, an employee may elect to termi4 nate participation in the arrangement at any 

5 time during a calendar year, except that if an 

6 employee so terminates, the arrangement may 

7 provide that the employee may not elect to re8 sume participation until the beginning of the 

9 next calendar year. 

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

11 requirements of this paragraph shall not be 

12 treated as met with respect to any year unless 

13 the employer notifies each employee eligible to 

14 participate, within a reasonable period of time 

15 before the 30th day before the beginning of 

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

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

18 such employee is so eligible), of— 

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

20 or treated as elected under paragraph 

21 (1)(B), 

22 ‘‘(ii) the opportunity to make the elec23 tion to terminate participation in the ar24 rangement under paragraph (2)(B), 


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1 ‘‘(iii) the opportunity to make the 

2 election under paragraph (1)(B)(ii) to have 

3 contributions or purchases made at a dif4 ferent percentage or in a different amount, 

5 and 

6 ‘‘(iv) the opportunity under paragraph 

7 (1)(B)(iii) to modify the manner in which 

8 such amounts are invested for such year. 

9 ‘‘(D) EMPLOYER MAY PERMIT EMPLOYEES

10 TO CHOOSE IRA.—Subject to subsection (f), if 

11 the employer so elects, the arrangement pro12 vides that an employee may elect to have con13 tributions made to any individual retirement 

14 plan specified by the employee. 

15 ‘‘(E) EMPLOYER MAY PERMIT EMPLOYEES

16 TO CHOOSE RETIREMENT BOND.—Subject to 

17 subsection (f), if the employer so elects, the ar18 rangement provides that an employee may elect 

19 to have payments applied toward the purchase 

20 of retirement bonds. 

21 ‘‘(3) DEFAULT INVESTMENTS.—If an employee 

22 is treated under clause (ii) of paragraph (1)(B) as 

23 having made an election to participate in an auto24 matic IRA arrangement— 


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

2 made an election to make contributions and 

3 payments in the amount determined under such 

4 clause, 

5 ‘‘(B) such contributions shall— 

6 ‘‘(i) if the employer has made an elec7 tion under subsection (f)(2), be transferred 

8 to an individual retirement plan of the des9 ignated trustee or issuer but only if the 

10 contributions are invested as provided in 

11 paragraph (5), or 

12 ‘‘(ii) be applied toward the purchase 

13 of a retirement bond. 

14 ‘‘(4) AMOUNT OF CONTRIBUTIONS AND PAY15 MENTS.— 

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

17 in this paragraph is— 

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

19 ‘‘(ii) such other percentage of com20 pensation as is specified in regulations pre21 scribed by the Secretary which is not less 

22 than 2 percent or more than 6 percent. 

23 ‘‘(B) AUTHORITY TO PROVIDE FOR PERI24 ODIC INCREASES.—In the case of qualifying em25 ployees under an automatic IRA arrangement 


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1 for 2 or more consecutive years, the Secretary 

2 may by regulation provide for periodic (not 

3 more frequent than annual) increases in the 

4 percentage of compensation an employee is 

5 deemed to have elected under subparagraph 

6 (A). The considerations the Secretary shall take 

7 into account in issuing any regulations under 

8 this subparagraph and subparagraph (A) shall 

9 include the potential effects on lower-income 

10 employees as well as on adequacy of savings. 

11 ‘‘(C) PERMITTED ADDITIONAL PROCE12 DURES TO LIMIT CONTRIBUTIONS.—An em13 ployer— 

14 ‘‘(i) shall have no responsibility for 

15 any calendar year for determining whether, 

16 or ensuring that, the contributions with re17 spect to any employee do not exceed the 

18 deductible amount in effect for taxable 

19 years beginning in the calendar year under 

20 section 219(b)(5) (determined without re21 gard to subparagraph (B) thereof), and 

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

23 satisfy the requirements of this section or 

24 any other provision of this title merely be25 cause the employer chooses to limit the 


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1 contributions under this subsection on be2 half of a qualifying employee for any cal3 endar year in a manner reasonably de4 signed to avoid exceeding such deductible 

5 amount. 

6 ‘‘(5) REQUIRED INVESTMENTS.— 

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

8 under paragraph (3)(B)(i) shall be invested 

9 only in the class of assets or funds described in 

10 subparagraph (B) unless the employer elects a 

11 class of assets or funds described in subpara12 graph (C), (D), (E), or (F). 

13 ‘‘(B) TARGET DATE/LIFECYCLE OPTION.— 

14 The class of assets or funds described in this 

15 subparagraph is the class of assets or funds 

16 that constitutes a qualified default investment 

17 alternative under Department of Labor regula18 tion section 2550.404c–5(e)(4)(i). 

19 ‘‘(C) PRINCIPAL PRESERVATION.—The 

20 class of assets or funds described in this sub21 paragraph is the class of assets or funds that 

22 is designed to protect the principal of the indi23 vidual on an ongoing basis, including passbook 

24 savings, certificates of deposit, insurance con25 tracts, mutual funds, United States savings 


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

2 similar assets specified in regulations. 

3 ‘‘(D) BALANCED OPTION.—The class of 

4 assets or funds described in this subparagraph 

5 is the class of assets or funds that constitutes 

6 a qualified default investment alternative under 

7 Department of Labor regulation section 

8 2550.404c–5(e)(4)(ii). 

9 ‘‘(E) GUARANTEED LIFETIME INCOME OP10 TION OR EQUIVALENT.—The class of assets or 

11 funds described in this subparagraph is the 

12 class of assets or funds that is designed to pro13 vide an employee with the right to elect to re14 ceive distributions as a defined level of income 

15 annually (or more frequently) for at least the 

16 remainder of the life of the employee or the 

17 joint lives of the employee and the employee’s 

18 designated beneficiary. No later than 12 

19 months after the date of enactment of this Act, 

20 the Secretary of Labor and the Secretary shall 

21 issue guidance defining a guaranteed lifetime 

22 income or equivalent. 

23 ‘‘(F) OTHER.—Any other class of assets or 

24 funds determined by the Secretary to be a 


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1 qualified investment for purposes of this sec2 tion. 

3 ‘‘(6) COORDINATION WITH WITHHOLDING.— 

4 The Secretary shall modify the withholding exemp5 tion certificate under section 3402(f) so that, in the 

6 case of any qualifying employee covered under an 

7 automatic IRA arrangement, any notice and election 

8 requirements with respect to the arrangement may 

9 be met through the use of an attachment to such 

10 certificate or other modifications of the withholding 

11 exemption procedures. 

12 ‘‘(7) TREATMENT AS IRA.—A qualifying em13 ployee for whom an automatic IRA is established 

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

15 such manner and form as the Secretary may pre16 scribe, whether to treat the individual retirement 

17 plan as described, or not described, in section 408A. 

18 If no such election is made, the plan shall be treated 

19 as described in section 408A and shall meet the re20 quirements of section 408A. 

21 ‘‘(8) EMPLOYER’S OPTION TO OBTAIN AFFIRMA22 TIVE ELECTIONS FROM EMPLOYEES INSTEAD OF

23 AUTOMATIC ENROLLMENT.—As an alternative to 

24 automatic enrollment, an employer may choose to 

25 comply with subsection (d)(1)(B)(ii) by notifying 


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1 employees that the employer wishes to obtain from 

2 each qualifying employee an affirmative election ei3 ther to contribute or not to contribute to an auto4 matic IRA, provided that any qualifying employee 

5 who fails to make such an election is treated in the 

6 manner provided under subsection (d)(1)(B)(ii). 

7 ‘‘(e) AUTOMATIC IRA CONTRIBUTIONS AND RETIRE8 MENT BOND PURCHASES TREATED LIKE OTHER CON9 TRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS.— 

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

11 that a contribution to an individual retirement plan 

12 or purchase of a retirement bond is made on behalf 

13 of an employee under an automatic IRA arrange14 ment instead of being made directly by the employee 

15 shall not affect the deductibility or other tax treat16 ment of the contribution or of other amounts under 

17 this title. 

18 ‘‘(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN

19 INTO ACCOUNT.—Any contribution to an individual 

20 retirement plan or purchase of a retirement bond 

21 made on behalf of an employee under an automatic 

22 IRA arrangement shall be taken into account in ap23 plying the limitations on contributions to individual 

24 retirement plans and the other provisions of this 

25 title applicable to individual retirement plans as if 


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1 the contribution or purchase had been made directly 

2 by the employee. 

3 ‘‘(f) DEPOSITS TO PLANS OF A DESIGNATED TRUST4 EE OR ISSUER AND FOR RETIREMENT BONDS.— 

5 ‘‘(1) IN GENERAL.—An employer shall not be 

6 treated as failing to satisfy the requirements of this 

7 section or any other provision of this title merely be8 cause the employer makes all contributions (or all 

9 contributions on behalf of employees who do not 

10 specify an individual retirement plan, trustee, or 

11 issuer to receive the contributions) to individual re12 tirement plans specified in paragraph (2) or to the 

13 Secretary or his agent for the purchase of retirement 

14 bonds specified in paragraph (3). 

15 ‘‘(2) INDIVIDUAL RETIREMENT PLANS OTHER

16 THAN THOSE SELECTED BY EMPLOYEE.—An em17 ployer may elect to have contributions for all quali18 fying employees participating in an automatic IRA 

19 arrangement made to individual retirement plans of 

20 a trustee or issuer under the arrangement that has 

21 been designated by the employer. The preceding sen22 tence shall not apply unless each participant is noti23 fied in writing that the participant’s balance may be 

24 transferred without cost or penalty to another indiVerDate Sep 11 2014 23:40 Jan 29, 2015 Jkt 049200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\H506.IH H506

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1 vidual retirement plan established by or on behalf of 

2 the participant. 

3 ‘‘(3) RETIREMENT BONDS.— 

4 ‘‘(A) IN GENERAL.—The Secretary shall 

5 provide that contributions deposited under sub6 paragraph (B) shall be applied to the purchase 

7 of a retirement bond in the name of each appli8 cable employee. 

9 ‘‘(B) PAYROLL DEPOSIT FEATURES.—The 

10 Secretary shall establish procedures so that con11 tributions may be applied to the purchase of re12 tirement bonds without undue administrative or 

13 paperwork requirements on participating em14 ployers. Such procedures shall ensure that only 

15 1 such retirement bond of each type (traditional 

16 or Roth) is issued for each TIN. 

17 ‘‘(4) PAYROLL TAX DEPOSIT PROCEDURE.—The 

18 procedures the Secretary shall establish may include 

19 a procedure under which an employer— 

20 ‘‘(A) may include with each deposit of tax 

21 required to be deducted and withheld under 

22 chapter 24 the aggregate amounts, for the pe23 riod covered by the deposit, which qualifying 

24 employees have designated under clause (i)(I) of 

25 subsection (d)(1)(B) (or are deemed to have 


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1 designated under clause (ii) of such subsection) 

2 as contributions to purchase retirement bonds 

3 on behalf of the employees under paragraph 

4 (3), and 

5 ‘‘(B) specifies, in such manner as the Sec6 retary may prescribe, information needed to 

7 purchase retirement bonds on behalf of each ap8 plicable employee for whom a contribution is to 

9 be made, including— 

10 ‘‘(i) the employee’s name and TIN, 

11 and 

12 ‘‘(ii) the amount of the contribution. 

13 ‘‘(5) PURPOSES.—The purposes of the retire14 ment bond program established under this sub15 section and subsection (g) include— 

16 ‘‘(A) providing new savers a convenient, 

17 low-cost investment option suitable for the ini18 tial accumulation of small automatic IRA con19 tributions, 

20 ‘‘(B) to reflect the intent that the long21 term investment of automatic IRA funds for 

22 most savers be in the private market rather 

23 than in retirement bonds, encouraging and as24 sisting individuals who accumulate larger 

25 amounts in retirement bonds to transfer those 


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1 funds to individual retirement plans in the pri2 vate market, while 

3 ‘‘(C) permitting individuals to remain in4 vested in retirement bonds if they choose to do 

5 so. 

6 ‘‘(6) REGULATIONS.—The Secretary may issue 

7 such regulations as are necessary to carry out the 

8 purposes of this subsection and subsection (g), in9 cluding— 

10 ‘‘(A) establishment of procedures to com11 municate to individuals the importance of in12 vestment diversification and the transfer option 

13 described in subparagraph (B), 

14 ‘‘(B) simplified procedures under which 

15 holders of retirement bonds may periodically 

16 choose to have the bonds or their proceeds 

17 transferred to available individual retirement 

18 plans, and 

19 ‘‘(C) means by which individuals may elect 

20 (or be treated as electing) whether to have re21 tirement bonds or their proceeds so transferred. 

22 Any such transfer shall be treated as a rollover con23 tribution for purposes of section 408(d)(3) (other 

24 than subparagraph (B) thereof). 

25 ‘‘(g) RETIREMENT BOND.— 


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1 ‘‘(1) RETIREMENT BOND.—The term ‘retire2 ment bond’ means a bond issued under chapter 31 

3 of title 31, which by its terms, or by regulations pre4 scribed by the Secretary under such chapter— 

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

6 rates that take into account the expected dura7 tion of the funds invested in retirement bonds 

8 and at rates determined or adjusted in a man9 ner and with sufficient frequency to provide 

10 substantial protection from inflation, 

11 ‘‘(B) is not transferable, and 

12 ‘‘(C) is designed for investment for retire13 ment under automatic IRA arrangements or 

14 other savings vehicles. 

15 ‘‘(2) 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 retirement bond, except as determined by the Sec21 retary. 

22 ‘‘(3) ANNUAL STATEMENT.—As soon as prac23 ticable after the close of the calendar year, the Sec24 retary shall make available an annual statement to 

25 each participant setting forth— 


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1 ‘‘(A) payments made by or on behalf of the 

2 participant for the retirement bond, 

3 ‘‘(B) amounts earned by the retirement 

4 bond, 

5 ‘‘(C) the value of the account as of the 

6 close of such calendar year, 

7 ‘‘(D) the importance of diversifying retire8 ment savings, 

9 ‘‘(E) the benefits of a well-balanced and di10 versified investment portfolio, 

11 ‘‘(F) a notice of the internet website of the 

12 Department of Labor for sources of information 

13 on individual investing and diversification, 

14 ‘‘(G) the procedures for redeeming a re15 tirement bond and directly transferring the re16 deemed amount into an individual retirement 

17 plan, 

18 ‘‘(H) other factors affecting retirement 

19 savings decisions, and 

20 ‘‘(I) such other information as the Sec21 retary determines necessary or appropriate. 

22 ‘‘(h) MODEL NOTICE.—The Secretary shall— 

23 ‘‘(1) provide a model notice, written in a man24 ner calculated to be understandable to the average 

25 worker, that is simple for employers to use— 


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1 ‘‘(A) to notify employees of the require2 ment under this section for the employer to pro3 vide certain employees with the opportunity to 

4 participate in an automatic IRA arrangement, 

5 and 

6 ‘‘(B) to satisfy the requirements of sub7 section (d)(2)(C), 

8 ‘‘(2) provide uniform forms for enrollment, in9 cluding automatic enrollment, in an automatic IRA 

10 arrangement, and 

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

12 means that small employers can access and use to 

13 obtain information on automatic IRA arrangements 

14 and to obtain required notices and forms. 

15 The information referred to in paragraph (3) shall 

16 be provided in a manner designed to assist employ17 ers and providers by facilitating the identification by 

18 employers of private-sector providers of individual 

19 retirement plans and associated investment options 

20 that are appropriate for use in automatic IRA ar21 rangements. 

22 ‘‘(i) CROSS REFERENCE.—For provision preempting 

23 conflicting State laws, see section 2(k) of the Automatic 

24 IRA Act of 2015.’’. 


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1 (b) MANDATORY TRANSFERS.—Section 

2 401(a)(31)(B) is amended— 

3 (1) by inserting ‘‘(including an automatic IRA 

4 arrangement)’’ after ‘‘individual retirement plan’’ 

5 each place it appears, and 

6 (2) by adding at the end the following new sen7 tence: ‘‘Any amount so transferred (and any earn8 ings thereon) shall be invested in a default invest9 ment described in section 408B(d)(5).’’. 

10 (c) PENALTY FOR FAILURE TO TIMELY REMIT CON11 TRIBUTIONS TO AUTOMATIC IRA ARRANGEMENTS.—Sec12 tion 4975(c) is amended by adding at the end the fol13 lowing new paragraph: 

14 ‘‘(7) SPECIAL RULE FOR AUTOMATIC IRA AR15 RANGEMENTS.—For purposes of paragraph (1), if 

16 an employer is required under an automatic IRA ar17 rangement under section 408B to deposit amounts 

18 withheld from an employee’s compensation into an 

19 automatic IRA or toward the purchase of a retire20 ment bond but fails to do so within the time pre21 scribed under section 408B(d)(2)(A), such amounts 

22 shall be treated as assets of the automatic IRA.’’. 

23 (d) COORDINATION WITH EMPLOYEE RETIREMENT

24 INCOME SECURITY ACT OF 1974.— 

25 (1) EXEMPTION.— 


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

2 Employee Retirement Income Security Act of 

3 1974 (29 U.S.C. 1002(2)) is amended— 

4 (i) by inserting ‘‘or (C)’’ after ‘‘sub5 paragraph (B)’’ in subparagraph (A), and 

6 (ii) by adding at the end the following 

7 new subparagraph: 

8 ‘‘(C) An automatic IRA arrangement de9 scribed in section 408B(d) of the Internal Rev10 enue Code of 1986 shall not be treated as an 

11 employee pension benefit plan or pension plan 

12 if, under the arrangement, contributions are to 

13 be made to an automatic IRA the provider of 

14 which is included in the website list established 

15 under section 408B(h)(3) of such Code, are to 

16 be made to an individual retirement plan des17 ignated by the employee, or are to be invested 

18 in retirement bonds (whether to the Secretary 

19 of the Treasury or to a designated trustee or 

20 other agent for that purpose).’’. 

21 (B) CUSTOMER IDENTIFICATION PRO22 GRAM.—Notwithstanding the amendment made 

23 by subparagraph (A), an individual retirement 

24 plan established pursuant to an automatic IRA 

25 arrangement described in section 408B(d) of 


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1 the Internal Revenue Code of 1986 shall, for 

2 purposes of any customer identification pro3 gram established under section 5318(l) of title 

4 31, United States Code, be treated as an ac5 count opened for the purpose of participating in 

6 an employee benefit plan established under the 

7 Employee Retirement Income Security Act of 

8 1974. 

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

10 such Act is amended— 

11 (A) by inserting the following sentence be12 fore the last sentence: ‘‘In the case of an auto13 matic IRA under section 408B of such Code 

14 that is not exempt under section 3(2)(C), a par15 ticipant or beneficiary shall, for purposes of 

16 paragraph (1), be treated as exercising control 

17 over the assets in the account on and after the 

18 7th day after notice has been given to an em19 ployee that such automatic IRA has been estab20 lished on behalf of the employee.’’, and 

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

22 automatic IRA under section 408B of such 

23 Code’’ after ‘‘arrangement’’ in the last sen24 tence. 


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1 (e) NOTICE OF AVAILABILITY OF INVESTMENT

2 GUIDELINES.— 

3 (1) IN GENERAL.—Section 408(i) (relating to 

4 reports) is amended by adding at the end the fol5 lowing new sentences: ‘‘Any report furnished under 

6 paragraph (2) to an individual shall include notice of 

7 the internet website of the Department of Labor for 

8 sources of information on individual investing and 

9 diversification.’’. 

10 (2) UPDATE INFORMATION.—Such information 

11 shall be modified (or updated) by the Secretary of 

12 Labor in consultation with the Secretary of the 

13 Treasury and the Chairman of the Securities and 

14 Exchange Commission to address needed changes 

15 due to the creation of automatic IRAs. 

16 (f) FAILURE TO PROVIDE ACCESS TO PAYROLL SAV17 INGS ARRANGEMENTS.—Chapter 43 (relating to qualified 

18 pension, etc., plans) is amended by adding at the end the 

19 following new section: 

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

21 TO PROVIDE EMPLOYEES ACCESS TO AUTO22 MATIC IRA ARRANGEMENTS. 

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

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


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1 section 408B) to meet the requirements of subsection (d) 

2 for a calendar year. 

3 ‘‘(b) AMOUNT.— 

4 ‘‘(1) IN GENERAL.—The amount of the tax im5 posed by subsection (a) on any failure for any cal6 endar year shall be $100 with respect to each em7 ployee to whom such failure relates. 

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

9 DISCOVERED AND REASONABLE DILIGENCE EXER10 CISED.—No tax shall be imposed by subsection (a) 

11 on any failure during any period for which it is es12 tablished to the satisfaction of the Secretary that the 

13 employer subject to liability for the tax did not know 

14 that the failure existed and exercised reasonable dili15 gence to meet the requirements of subsection (d). 

16 ‘‘(3) TAX NOT TO APPLY TO FAILURES COR17 RECTED WITHIN 90 DAYS.—No tax shall be imposed 

18 by subsection (a) on any failure if— 

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

20 the tax under subsection (a) exercised reason21 able diligence to meet the requirements of sub22 section (d), and 

23 ‘‘(B) the employer provides the automatic 

24 IRA arrangement described in section 408B to 

25 each employee eligible to participate in the arVerDate Sep 11 2014 23:40 Jan 29, 2015 Jkt 049200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\H506.IH H506

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1 rangement by the end of the 90-day period be2 ginning on the first date the employer knew, or 

3 exercising reasonable diligence would have 

4 known, that such failure existed. 

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

6 failure which is due to reasonable cause and not to 

7 willful neglect, the Secretary may waive part or all 

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

9 that the payment of such tax would be excessive or 

10 otherwise inequitable relative to the failure involved. 

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

12 prescribe and implement procedures for obtaining con13 firmation that employers are in compliance with the re14 quirements of subsection (d). The Secretary, in the Sec15 retary’s discretion, may prescribe that the confirmation 

16 shall be obtained on an annual or less frequent basis, and 

17 may use for this purpose the annual report or quarterly 

18 report for employment taxes, or such other means as the 

19 Secretary may deem advisable. 

20 ‘‘(d) REQUIREMENT TO PROVIDE EMPLOYEE ACCESS

21 TO AUTOMATIC IRA ARRANGEMENTS.—The requirements 

22 of this subsection are met if the employer meets the re23 quirements of section 408B.’’. 

24 (g) WAIVER OF EARLY WITHDRAWAL PENALTY FOR

25 CERTAIN DISTRIBUTIONS FOLLOWING INITIAL ELECTION


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1 TO PARTICIPATE IN AUTOMATIC IRA ARRANGEMENT.— 

2 Section 72(t) is amended by adding at the end the fol3 lowing new paragraph: 

4 ‘‘(11) DISTRIBUTION FOLLOWING INITIAL

5 ELECTION TO PARTICIPATE IN AUTOMATIC IRA AR6 RANGEMENT.—Paragraph (1) shall not apply in the 

7 case of a distribution to a qualifying employee made 

8 not later than 90 days after the initial election 

9 under section 408B(d)(1)(B)(ii).’’. 

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

11 States Code, is amended— 

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

13 after ‘‘408A,’’, and 

14 (2) in subsection (n) by inserting ‘‘, or in an 

15 automatic IRA arrangement described in section 

16 408B,’’. 

17 (i) AUTOMATIC IRA ADVISORY GROUP.— 

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

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

20 of the Treasury and the Secretary of Labor shall 

21 jointly establish an Automatic IRA Advisory Group 

22 (in this subsection referred to as the ‘‘Advisory 

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

24 be to make recommendations regarding the auto25 matic IRA investment options described in section 


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1 408B(d)(5) of the Internal Revenue Code of 1986 

2 and the website described in section 408B(h)(3) of 

3 such Code, including, with respect to automatic IRA 

4 arrangements, the disclosure of information regard5 ing fees and expenses, the use of low-cost investment 

6 options, the appropriate use of electronic methods to 

7 provide notice and disclosure, and such other related 

8 matters as may be determined by the Secretaries. 

9 (2) MEMBERSHIP.—The Advisory Group shall 

10 consist of not more than 15 members and shall be 

11 composed of— 

12 (A) such persons as the Secretaries of the 

13 Treasury and Labor may consider appropriate 

14 to provide expertise regarding investments for 

15 retirement, including providers of individual re16 tirement accounts and individual retirement an17 nuities described in section 408 or 408A of 

18 such Code, and 

19 (B) one or more representatives of the De20 partment of Labor and of the Department of 

21 the Treasury. 

22 (3) COMPENSATION.—The members of the Ad23 visory Group shall serve without compensation. 

24 (4) ADMINISTRATIVE SUPPORT.—The Depart25 ment of the Treasury and the Department of Labor 


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1 shall jointly provide appropriate administrative sup2 port to the Advisory Group, including technical as3 sistance. The Advisory Group may use the services 

4 and facilities of such Departments, with or without 

5 reimbursement, as jointly determined by such De6 partments. 

7 (5) REPORT BY ADVISORY GROUP.—Not later 

8 than 12 months after the date of the enactment of 

9 this Act, the Advisory Group shall submit to the 

10 Secretary of Labor and the Secretary of the Treas11 ury a report containing its recommendations. The 

12 Secretaries may request that the Advisory Group 

13 submit subsequent reports. 

14 (j) CONFORMING AMENDMENTS.— 

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

16 I of subchapter D of chapter 1 is amended by insert17 ing after the item relating to section 408A the fol18 lowing new item: 

‘‘Sec. 408B. Right to automatic IRA arrangements at work.’’. 

19 (2) The table of sections for chapter 43 is 

20 amended by adding at the end the following new 

21 item: 

‘‘Sec. 4980J. Requirements for employers to provide employees access to automatic IRA arrangements.’’. 

22 (k) PREEMPTION OF CONFLICTING STATE LAWS.— 

23 The amendments made by this section shall supersede any 


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1 law of a State that would directly or indirectly prohibit 

2 or restrict the establishment or operation of an automatic 

3 IRA arrangement meeting the requirements of section 

4 408B of the Internal Revenue Code of 1986. Nothing in 

5 such amendments shall be construed to impair or super6 sede any State law to the extent it provides a remedy for 

7 the failure to make payroll deposit payments under any 

8 such automatic IRA arrangement within the period re9 quired under such section 408B. 

10 (l) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to calendar years beginning after 

12 December 31, 2016. 

13 SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING 

14 AUTOMATIC IRA ARRANGEMENTS. 

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 (relating to business related cred17 its) is amended by adding at the end the following new 

18 section: 

19 ‘‘SEC. 45S. SMALL EMPLOYER AUTOMATIC IRA ARRANGE20 MENT. 

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

22 in the case of an eligible employer maintaining an auto23 matic IRA arrangement meeting the requirements of sec24 tion 408B (without regard to whether the employer is re25 quired to maintain the arrangement), the small employer 


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1 automatic IRA arrangement credit determined under this 

2 section for any taxable year is the amount determined 

3 under subsection (b). 

4 ‘‘(b) AMOUNT OF CREDIT.— 

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

6 determined under this section for any taxable year 

7 with respect to an eligible employer shall be the sum 

8 of— 

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

10 qualifying employees (within the meaning of 

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

12 made under the automatic IRA arrangement re13 ferred to in subsection (a) for the calendar year 

14 in which the taxable year begins, plus 

15 ‘‘(B) $500 for the taxable year which be16 gins in the first calendar year, and $250 for the 

17 taxable year which begins in the second cal18 endar year, in which the eligible employer main19 tains an automatic IRA arrangement meeting 

20 the requirements of section 408B. 

21 ‘‘(2) LIMITATION.—No more than 10 qualifying 

22 employees may be taken into account under para23 graph (1)(A) for a taxable year. 

24 ‘‘(3) DURATION OF CREDIT.—The credit de25 scribed in paragraph (1)(A) shall apply only for a 


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1 taxable year which begins in the first 6 calendar 

2 years in which the eligible employer maintains an 

3 automatic IRA arrangement meeting the require4 ments of section 408B. 

5 ‘‘(4) COORDINATION WITH SMALL EMPLOYER

6 STARTUP CREDIT.— 

7 ‘‘(A) No credit shall be allowed under this 

8 section to the employer for any taxable year if 

9 a credit is determined under section 45E with 

10 respect to the employer for the taxable year. 

11 ‘‘(B) If the eligible employer maintains an 

12 automatic IRA arrangement meeting the re13 quirements of section 408B with respect to any 

14 of the first three calendar years for which the 

15 employer could adopt such an arrangement and 

16 subsequently adopts an eligible employer plan 

17 for its employees for any of those years which 

18 it maintains for such third taxable year, then 

19 section 45E(b)(1) shall be applied with respect 

20 to the eligible employer by replacing ‘2 taxable 

21 years’ with ‘3 taxable years’. 

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

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

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

25 employer which— 


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1 ‘‘(1) maintains an automatic IRA arrangement 

2 meeting the requirements of section 408B, 

3 ‘‘(2) on each day during the preceding calendar 

4 year, had no more than 100 employees, and 

5 ‘‘(3) did not maintain a qualifying plan or ar6 rangement (described in section 408B(b)) during the 

7 portion of the calendar year preceding the adoption 

8 of the automatic IRA arrangement and the 2 pre9 ceding calendar years. 

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

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

12 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI13 NESS CREDIT.—Section 38(b) is amended by striking 

14 ‘‘plus’’ at the end of paragraph (35), by striking the period 

15 at the end of paragraph (36) and inserting ‘‘, plus’’, and 

16 by adding at the end the following new paragraph: 

17 ‘‘(37) in the case of an eligible employer (as de18 fined in section 45S(c)) maintaining an automatic 

19 IRA arrangement meeting the requirements of sec20 tion 408B, the small employer automatic IRA ar21 rangement credit determined under section 45S(a).’’. 

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

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

24 is amended by adding at the end the following new item: 

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


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2016. 

4 SEC. 4. STUDIES. 

5 (a) IN GENERAL.—The Secretary of the Treasury 

6 and the Secretary of Labor shall jointly conduct a separate 

7 study of the feasibility and desirability of each of the fol8 lowing: 

9 (1) Extending to automatic IRA arrangements 

10 spousal consent requirements similar to, or based 

11 on, those that apply under the Federal Employees’ 

12 Thrift Savings Plan, including consideration of 

13 whether modifications of such requirements are nec14 essary to apply them to automatic IRA arrange15 ments. 

16 (2) Establishing procedures under which 

17 amounts saved by employees in retirement bonds 

18 would be automatically transferred into alternative 

19 diversified investments provided by the private sector 

20 when employees’ automatic IRA balances reach a 

21 certain dollar level as well as procedures facilitating 

22 employees’ ability to transfer into such private sector 

23 investments. 

24 (b) STUDY OF CONSOLIDATION OF INDIVIDUAL RE25 TIREMENT PLANS.—The Secretary of the Treasury and 


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1 the Secretary of Labor shall jointly conduct a separate 

2 study of the feasibility and desirability of— 

3 (1) using data submitted on investments in in4 dividual retirement accounts and annuities to enable 

5 individuals with multiple such accounts and annu6 ities that include very small amounts to receive peri7 odic notices informing them about the location of 

8 these accounts and how such accounts and annuities 

9 might be consolidated, and 

10 (2) using investment arrangements associated 

11 with automatic IRAs to assist in addressing the 

12 problem of abandoned accounts. 

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

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

15 report the results of each study conducted under this sec16 tion, together with any recommendations for legislative 

17 changes, to the Committees on Finance and Health, Edu18 cation, Labor, and Pensions of the Senate and the Com19 mittees on Ways and Means and Education and the Work20 force of the House of Representatives. 

21 SEC. 5. ELIMINATING BARRIERS TO USE OF MULTIPLE EM22 PLOYER PLANS. 

23 By December 31, 2015, the Secretaries of the Treas24 ury and Labor shall— 


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1 (1) prescribe administrative guidance estab2 lishing conditions under which an employer partici3 pating in a plan described in section 413(c) of the 

4 Internal Revenue Code of 1986 shall not have any 

5 liability under title I of the Employee Retirement In6 come Security Act of 1974 with respect to the acts 

7 or omissions of one or more other participating em8 ployers, which regulations may require that the por9 tion of the plan attributable to such participating 

10 employers be spun off to plans maintained by such 

11 employers, 

12 (2) prescribe administrative guidance estab13 lishing conditions under which a plan described in 

14 section 413(c) of such Code may be treated as satis15 fying the qualification requirements of sections 

16 401(a) and 413(c) of such Code despite the violation 

17 of such requirements by one or more participating 

18 employers, including requiring, if appropriate, that 

19 the portion of the plan attributable to such partici20 pating employers be spun off to plans maintained by 

21 such employers, and 

22 (3) prescribe administrative guidance providing 

23 simplified means by which plans described in section 

24 413(c) of such Code may satisfy the requirements of 


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1 section 103 of the Employee Retirement Income Se2 curity Act of 1974. 

3 SEC. 6. INCREASE IN CREDIT LIMITATION FOR SMALL EM4 PLOYER PENSION PLAN STARTUP COSTS. 

5 (a) IN GENERAL.—Section 45E(b)(1) is amended to 

6 read as follows: 

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

8 taxable years immediately following the first credit 

9 year, the greater of— 

10 ‘‘(A) $500, or 

11 ‘‘(B) the lesser of— 

12 ‘‘(i) $250 for each employee of the eli13 gible employer who is not a highly com14 pensated employee (as defined in section 

15 415(q)) and who is eligible to participate 

16 in the eligible employer plan maintained by 

17 the eligible employer, or 

18 ‘‘(ii) $5,000, and’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2015. 

Æ 


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