I 

113TH CONGRESS 

2D SESSION H. R. 5875 

To amend the Internal Revenue Code of 1986 to encourage retirement savings 

by modifying requirements with respect to employer-established IRAs, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 11, 2014 

Mr. KIND (for himself and Mr. REICHERT) 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 encourage 

retirement savings by modifying requirements with respect to employer-established 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; TABLE OF CONTENTS. 

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

5 ‘‘Small Businesses Add Value for Employees Act of 2014’’ 

6 or the ‘‘SAVE Act of 2014’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Elimination of restriction on SIMPLE IRA rollovers. 

Sec. 3. Allowing mid-year SIMPLE IRA plan termination. 

Sec. 4. Elimination of higher penalty on early SIMPLE IRA distributions. 

Sec. 5. Increase in contributions allowed for SIMPLE IRA. 

Sec. 6. SIMPLE 401(k) parity for additional nonelective employer contributions. 

Sec. 7. Automatic deferral IRAs. 

Sec. 8. Modification of automatic enrollment safe harbor. 

Sec. 9. Secure deferral arrangements. 

Sec. 10. Credit for employers with respect to modified safe harbor requirements. 

Sec. 11. Modification of regulations. 

Sec. 12. Limited transfer of unused balance in flexible spending arrangement. 

Sec. 13. Prior years compensation taken into account in determining maximum 

retirement savings deduction. 

Sec. 14. Expanding small employer pension plan startup cost credit. 

Sec. 15. Financial education. 

Sec. 16. Small employer plans. 

Sec. 17. Modification of ERISA rules relating to multiple employer defined contribution plans. 

Sec. 18. Clarification of treatment of individual retirement plans with payroll 

deduction. 

Sec. 19. Disclosure regarding lifetime income. 

Sec. 20. Lifetime income safe harbor. 

3 SEC. 2. ELIMINATION OF RESTRICTION ON SIMPLE IRA 

4 ROLLOVERS. 

5 (a) IN GENERAL.—Paragraph (3) of section 408(d) 

6 of the Internal Revenue Code of 1986 (relating to rollover 

7 contribution) is amended by striking subparagraph (G). 

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

9 this section shall apply to distributions in taxable years 

10 beginning after the date of the enactment of this Act. 


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1 SEC. 3. ALLOWING MID-YEAR SIMPLE IRA PLAN TERMI2 NATION. 

3 (a) IN GENERAL.—Subsection (p) of section 408 of 

4 the Internal Revenue Code of 1986 is amended by adding 

5 at the end the following new paragraph: 

6 ‘‘(11) SPECIAL RULES RELATING TO MID-YEAR

7 TERMINATION.— 

8 ‘‘(A) IN GENERAL.—An employer may 

9 elect to terminate (in such form and manner as 

10 the Secretary may provide) the qualified salary 

11 reduction arrangement of the employer at any 

12 time during the year. 

13 ‘‘(B) PRORATION AND APPLICATION OF

14 QUALIFIED PLAN LIMITATION.—In the case of a 

15 year during which an employer terminates a 

16 qualified salary reduction arrangement before 

17 the end of such year— 

18 ‘‘(i) the applicable dollar amount de19 termined under paragraph (2)(E) for such 

20 year and the applicable dollar amount de21 termined under section 414(v)(2)(B)(ii) for 

22 such year shall both be prorated to the 

23 date of such termination, 

24 ‘‘(ii) for purposes of determining the 

25 compensation of an employee for such ar26 rangement for such year, the year of such 


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1 termination shall be treated as ending on 

2 the date of such termination, and 

3 ‘‘(iii) subparagraph (D) of paragraph 

4 (2) shall not apply with respect to a quali5 fied plan maintained in such year only 

6 after the date of such termination. 

7 ‘‘(C) MATCHING CONTRIBUTION.—Termi8 nation of an arrangement under subparagraph 

9 (A) shall not be construed to modify the re10 quirement of subparagraph (A)(iii) (with re11 spect to any elective employer contributions) or 

12 (B) (with respect to nonelective contributions) 

13 of paragraph (2) made by the employer on be14 half of an employee during the portion of such 

15 year the qualified salary reduction arrangement 

16 is in effect.’’. 

17 (b) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to years beginning after the date 

19 of the enactment of this Act. 

20 SEC. 4. ELIMINATION OF HIGHER PENALTY ON EARLY SIM21 PLE IRA DISTRIBUTIONS. 

22 (a) IN GENERAL.—Subsection (t) of section 72 of the 

23 Internal Revenue Code of 1986 (relating to 10-percent ad24 ditional tax on early distributions from qualified retire25 ment plans) is amended by striking paragraph (6). 


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

2 this section shall apply to distributions in taxable years 

3 beginning after the date of the enactment of this Act. 

4 SEC. 5. INCREASE IN CONTRIBUTIONS ALLOWED FOR SIM5 PLE IRA. 

6 (a) ADDITIONAL NONELECTIVE EMPLOYER CON7 TRIBUTIONS ALLOWED.— 

8 (1) IN GENERAL.—Subparagraph (A) of section 

9 408(p)(2) of the Internal Revenue Code of 1986 (re10 lating to qualified salary reduction arrangement) is 

11 amended by striking ‘‘and’’ at the end of clause (iii), 

12 by redesignating clause (iv) as clause (v), and by in13 serting after clause (iii) the following new clause: 

14 ‘‘(iv) the employer may make, in addi15 tion to any other contribution under this 

16 paragraph, nonelective contributions which 

17 meet the requirements of subparagraph 

18 (F), and’’. 

19 (2) REQUIREMENTS RELATING TO ADDITIONAL

20 NONELECTIVE CONTRIBUTIONS.—Paragraph (2) of 

21 section 408(p) of such Code is amended by adding 

22 at the end the following new subparagraph: 

23 ‘‘(F) REQUIREMENTS RELATING TO ADDI24 TIONAL NONELECTIVE CONTRIBUTIONS UNDER

25 subparagraph (A)(iv).— 


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1 ‘‘(i) IN GENERAL.—Nonelective con2 tributions meet the requirements of this 

3 subparagraph if— 

4 ‘‘(I) such contributions do not ex5 ceed more than 10 percent of com6 pensation (subject to the limitation 

7 described in subparagraph (B)(ii)) for 

8 each employee who is eligible to par9 ticipate in the arrangement and who 

10 has at least $5,000 of compensation 

11 from the employer for the year, and 

12 ‘‘(II) such contributions are 

13 made either as a uniform percentage 

14 of compensation or a uniform dollar 

15 amount for all participants. 

16 ‘‘(ii) PERMITTED DISPARITY RULES

17 NOT APPLICABLE.—Section 401(l) shall 

18 not apply for purposes of determining 

19 whether the requirements of clause (i) are 

20 met.’’. 

21 (3) CONFORMING AMENDMENT.—Clause (v) of 

22 section 408(p)(2)(A) of such Code, as redesignated 

23 by this section, is amended by striking ‘‘clause (i) or 

24 (iii)’’ and inserting ‘‘clause (i), (iii), or (iv)’’. 


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1 (b) INCREASE IN ELECTIVE CONTRIBUTION LIMITA2 TION.—Subparagraph (E) of section 408(p)(2) is amend3 ed to read as follows: 

4 ‘‘(E) APPLICABLE DOLLAR AMOUNT.—For 

5 purposes of subparagraph (A)(ii), the applicable 

6 dollar amount shall be the applicable dollar 

7 amount in effect under section 402(g)(1).’’. 

8 (c) SIMPLE IRA SUBJECT TO DEFINED CONTRIBU9 TION PLAN LIMITATION.—Subsection (p) of section 408 

10 of such Code, as amended by section 3, is amended by 

11 adding at the end the following new paragraph: 

12 ‘‘(12) SUBJECT TO DEFINED CONTRIBUTION

13 PLAN LIMITATION.—An arrangement shall not be 

14 treated as a qualified salary reduction arrangement 

15 for any year if contributions with respect to any em16 ployee for the year exceed the limitation of para17 graph (1) of section 415(c) (relating to limitation for 

18 defined contribution plans).’’. 

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

20 this section shall apply to contributions for taxable years 

21 beginning after December 31, 2015. 

22 SEC. 6. SIMPLE 401(k) PARITY FOR ADDITIONAL NONELEC23 TIVE EMPLOYER CONTRIBUTIONS. 

24 (a) IN GENERAL.—Subparagraph (B) of section 

25 401(k)(11) of such Code (relating to contribution requireVerDate Sep 11 2014 04:40 Dec 20, 2014 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5875.IH H5875

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1 ments) is amended by adding at the end the following new 

2 clause: 

3 ‘‘(iv) SPECIAL RULE FOR ADDITIONAL

4 NONELECTIVE EMPLOYER CONTRIBU5 TIONS.—An arrangement shall not be 

6 treated as failing to meet the requirements 

7 of this subparagraph merely because under 

8 such arrangement the employer makes, in 

9 addition to any other contribution under 

10 this subparagraph, nonelective contribu11 tions of not more than 10 percent of com12 pensation for each employee who is eligible 

13 to participate in the arrangement and who 

14 has at least $5,000 of compensation from 

15 the employer for the year.’’. 

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

17 this section shall apply to plan years beginning after De18 cember 31, 2015. 

19 SEC. 7. AUTOMATIC DEFERRAL IRAS. 

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

21 D of chapter 1 of the Internal Revenue Code of 1986 (re22 lating to pension, profit-sharing, stock bonus plans, etc.) 

23 is amended by inserting after section 408A the following 

24 new section: 


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1 ‘‘SEC. 408B. AUTOMATIC DEFERRAL IRAS. 

2 ‘‘(a) IN GENERAL.—An automatic deferral IRA shall 

3 be treated for purposes of this title in the same manner 

4 as an individual retirement plan. An automatic deferral 

5 IRA may also be treated as a Roth IRA for purposes of 

6 this title if it meets the requirements of section 408A. 

7 ‘‘(b) AUTOMATIC DEFERRAL IRA.—For purposes of 

8 this section, the term ‘automatic deferral IRA’ means an 

9 individual retirement plan (as defined in section 

10 7701(a)(37)) with respect to which contributions are made 

11 under an arrangement which satisfies the requirements of 

12 paragraphs (1) through (4) of subsection (c). 

13 ‘‘(c) AUTOMATIC DEFERRAL IRA ARRANGEMENTS.— 

14 ‘‘(1) ENROLLMENT.— 

15 ‘‘(A) IN GENERAL.—The requirements of 

16 this paragraph are met if each employee eligible 

17 to participate in the arrangement is treated as 

18 having elected to have the employer make pay19 ments as elective contributions to an automatic 

20 deferral IRA on behalf of such employee (which 

21 would have otherwise been made to the em22 ployee directly in cash) in an amount equal to 

23 so much of a qualified percentage of compensa24 tion of such employee as does not exceed the 

25 deductible amount for such year (within the 

26 meaning of section 219(b)). 


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1 ‘‘(B) ELIGIBILITY.—For purposes of sub2 paragraph (A), an employee is eligible to par3 ticipate if such employee has at least $5,000 of 

4 compensation from the employer for the pre5 ceding year. 

6 ‘‘(C) ELECTION OUT.—The election treat7 ed as having been made under subparagraph 

8 (A) shall cease to apply with respect to any em9 ployee who makes an affirmative election— 

10 ‘‘(i) to not have such elective contribu11 tions made, or 

12 ‘‘(ii) not later than the close of the 

13 30-day period beginning on the date of the 

14 first contribution with respect to such em15 ployee, to make elective contributions at a 

16 level specified in such affirmative election. 

17 ‘‘(D) QUALIFIED PERCENTAGE.—For pur18 poses of this paragraph, the term ‘qualified per19 centage’ means, with respect to any employee, 

20 any percentage determined under the arrange21 ment if such percentage is applied uniformly, 

22 does not exceed 15 percent, and is at least— 

23 ‘‘(i) 3 percent during the period end24 ing on the last day of the first plan year 

25 which begins after the date on which the 


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1 first elective contribution described in sub2 paragraph (A) is made with respect to 

3 such employee, and 

4 ‘‘(ii) during any subsequent plan year, 

5 a percentage equal to— 

6 ‘‘(I) 3 percent, plus 

7 ‘‘(II) 1 percent multiplied by the 

8 number of plan years (but not more 

9 than 12) beginning after the plan year 

10 described in clause (i). 

11 ‘‘(2) NOTICE.— 

12 ‘‘(A) IN GENERAL.—The requirements of 

13 this paragraph are met if, within a reasonable 

14 period before the first day an employee is eligi15 ble to participate in the arrangement, the em16 ployee receives written notice of the employee’s 

17 rights and obligations under the arrangement 

18 which— 

19 ‘‘(i) is sufficiently accurate and com20 prehensive to apprise the employee of such 

21 rights, and 

22 ‘‘(ii) is written in a manner calculated 

23 to be understood by the average employee 

24 to whom the arrangement applies. 


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1 ‘‘(B) TIMING AND CONTENT.—A notice 

2 shall not be treated as meeting the require3 ments of subparagraph (A) with respect to an 

4 employee unless— 

5 ‘‘(i) the notice explains the employee’s 

6 right to elect not to have elective contribu7 tions made on the employee’s behalf (or to 

8 elect to have such contributions made at a 

9 different percentage), 

10 ‘‘(ii) the notice explains how contribu11 tions made under the arrangement will be 

12 invested in the absence of any investment 

13 election by the employee, and 

14 ‘‘(iii) the employee has a reasonable 

15 period of time after receipt of the notice 

16 described in clauses (i) and (ii) and before 

17 the first elective contribution is made to 

18 make either such election. 

19 ‘‘(3) DEFAULT INVESTMENT ARRANGEMENT.— 

20 The requirements of this paragraph are met if— 

21 ‘‘(A) in the absence of an investment elec22 tion by the employee with respect to the em23 ployee’s interest in the trust, such interest is in24 vested as provided in regulations prescribed 

25 pursuant to subparagraph (A) of section 


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1 404(c)(5) of the Employee Retirement Income 

2 Security Act of 1974, and 

3 ‘‘(B) the employer provides each employee 

4 who has an interest in the trust, notice which 

5 meets the requirements of subparagraph (B) of 

6 such section. 

7 ‘‘(4) ADMINISTRATIVE REQUIREMENTS.—The 

8 requirements of this paragraph are met if— 

9 ‘‘(A) an employer must make— 

10 ‘‘(i) the elective contributions under 

11 paragraph (1)(A) not later than the close 

12 of the 30-day period following the last day 

13 of the month with respect to which the 

14 contributions are to be made, and 

15 ‘‘(ii) a payment of interest at the 

16 overpayment rate (as determined under 

17 section 6621(a)) on any such elective con18 tribution made after the end of the period 

19 specified in clause (i), 

20 ‘‘(B) an employee may elect to terminate 

21 participation in the arrangement at any time 

22 during the year, except that if the employee so 

23 terminates, the arrangement may provide that 

24 the employee may not elect to resume participa25 tion until the beginning of the next year, and 


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1 ‘‘(C) each employee eligible to participate 

2 may elect, during the 30-day period before the 

3 beginning of any year, or to modify the amount 

4 subject to such arrangement, for such year.’’. 

5 (b) FAILURE TO MAKE TIMELY CONTRIBUTIONS.— 

6 Chapter 43 of such Code is amended by adding at the 

7 end the following: 

8 ‘‘SEC. 4980J. FAILURE TO MAKE TIMELY CONTRIBUTIONS 

9 UNDER AUTOMATIC DEFERRAL IRAS. 

10 ‘‘(a) INITIAL TAX.—If at any time during any taxable 

11 year an employer maintains an automatic deferral IRA 

12 which is part of a plan to which section 408B applies, 

13 there is hereby imposed on the employer for the taxable 

14 year a tax equal to 10 percent of the aggregate required 

15 contributions to such automatic deferral IRA for all plan 

16 years that are not paid by the date specified in section 

17 408B(c)(4)(A)(i) and that remain unpaid as of the end 

18 of any plan year ending with or within the taxable year. 

19 ‘‘(b) ADDITIONAL TAX.—If a tax is imposed under 

20 subsection (a) on any unpaid required contribution and 

21 such amount remains unpaid as of the close of the taxable 

22 period, there is hereby imposed a tax equal to 100 percent 

23 of the unpaid required contribution to the extent not so 

24 paid or corrected. 

25 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 


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1 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

2 DISCOVERED EXERCISING REASONABLE DILI3 GENCE.—No tax shall be imposed by subsection (a) 

4 on any failure during any period for which it is es5 tablished to the satisfaction of the Secretary that the 

6 employer did not know, and exercising reasonable 

7 diligence would not have known, that such failure 

8 existed. 

9 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR10 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

11 by subsection (a) on any failure if— 

12 ‘‘(A) such failure was due to reasonable 

13 cause and not to willful neglect, and 

14 ‘‘(B) such failure is corrected during the 

15 30-day period beginning on the 1st date the 

16 employer knew, or exercising reasonable dili17 gence would have known, that such failure ex18 isted. 

19 ‘‘(3) WAIVER BY SECRETARY.—In the case of a 

20 failure which is due to reasonable cause and not to 

21 willful neglect, the Secretary may waive part or all 

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

23 that the payment of such tax would be excessive rel24 ative to the failure involved.’’. 


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1 (c) PREEMPTION OF CONFLICTING STATE LAWS.— 

2 Any law of a State shall be superseded if it would directly 

3 or indirectly prohibit or restrict an employer from creating 

4 or maintaining an automatic deferral IRA (as defined in 

5 section 408B of the Internal Revenue Service of 1986). 

6 (d) CLERICAL AMENDMENT.—The table of sections 

7 for subpart A of part I of subchapter D of chapter 1 of 

8 the Internal Revenue Code of 1986 is amended by insert9 ing after the item relating to 408A the following new item: 

‘‘408B. Automatic deferral IRAs.’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2015. 

13 SEC. 8. MODIFICATION OF AUTOMATIC ENROLLMENT SAFE 

14 HARBOR. 

15 (a) IN GENERAL.— 

16 (1) REMOVAL OF 10 PERCENT CAP.—Clause 

17 (iii) of section 401(k)(13)(C) of the Internal Rev18 enue Code of 1986 is amended by striking ‘‘, does 

19 not exceed 10 percent, and is at least’’ and inserting 

20 ‘‘and is’’. 

21 (2) CONFORMING AMENDMENTS.— 

22 (A) Subclause (I) of section 

23 401(k)(13)(C)(iii) of such Code is amended by 

24 striking ‘‘3 percent’’ and inserting ‘‘at least 3 

25 percent, but not greater than 10 percent,’’. 


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1 (B) Subclause (II) of section 

2 401(k)(13)(C)(iii) of such Code is amended by 

3 striking ‘‘4 percent’’ and inserting ‘‘at least 4 

4 percent, but not greater than 15 percent,’’. 

5 (C) Subclause (III) of section 

6 401(k)(13)(C)(iii) of such Code is amended by 

7 striking ‘‘5 percent’’ and inserting ‘‘at least 5 

8 percent’’. 

9 (D) Subclause (IV) of section 

10 401(k)(13)(C)(iii) of such Code is amended by 

11 striking ‘‘6 percent’’ and inserting ‘‘at least 6 

12 percent’’. 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to plan years beginning after the 

15 date of enactment of this Act. 

16 SEC. 9. SECURE DEFERRAL ARRANGEMENTS. 

17 (a) IN GENERAL.—Subsection (k) of section 401 of 

18 the Internal Revenue Code of 1986 is amended by adding 

19 at the end the following new paragraph: 

20 ‘‘(14) ALTERNATIVE METHOD FOR SECURE DE21 FERRAL ARRANGEMENTS TO MEET NONDISCRIMINA22 TION REQUIREMENTS.— 

23 ‘‘(A) IN GENERAL.—A secure deferral ar24 rangement shall be treated as meeting the re25 quirements of paragraph (3)(A)(ii). 


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1 ‘‘(B) SECURE DEFERRAL ARRANGE2 MENT.—For purposes of this paragraph, the 

3 term ‘secure deferral arrangement’ means any 

4 cash or deferred arrangement which meets the 

5 requirements of subparagraphs (C), (D), and 

6 (E) of paragraph (13), except as modified by 

7 this paragraph. 

8 ‘‘(C) QUALIFIED PERCENTAGE.—For pur9 poses of this paragraph, with respect to any 

10 employee, the term ‘qualified percentage’ 

11 means, in lieu of the meaning given such term 

12 in paragraph (13)(C)(iii), any percentage deter13 mined under the arrangement if such percent14 age is applied uniformly and is— 

15 ‘‘(i) at least 6 percent, but not greater 

16 than 10 percent, during the period ending 

17 on the last day of the first plan year which 

18 begins after the date on which the first 

19 elective contribution described in para20 graph (13)(C)(i) is made with respect to 

21 such employee, 

22 ‘‘(ii) at least 8 percent during the 

23 first plan year following the plan year de24 scribed in clause (i), and 


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1 ‘‘(iii) at least 10 percent during any 

2 subsequent plan year. 

3 ‘‘(D) MATCHING CONTRIBUTIONS.— 

4 ‘‘(i) IN GENERAL.—For purposes of 

5 this paragraph, an arrangement shall be 

6 treated as having met the requirements of 

7 paragraph (13)(D)(i) if and only if the em8 ployer makes matching contributions on 

9 behalf of each employee who is not a highly 

10 compensated employee in an amount equal 

11 to the sum of— 

12 ‘‘(I) 100 percent of the elective 

13 contributions of the employee to the 

14 extent that such contributions do not 

15 exceed 1 percent of compensation, 

16 ‘‘(II) 50 percent of so much of 

17 such contributions as exceed 1 percent 

18 but do not exceed 6 percent of com19 pensation, plus 

20 ‘‘(III) 25 percent of so much of 

21 such contributions as exceed 6 percent 

22 but do not exceed 10 percent of com23 pensation. 

24 ‘‘(ii) APPLICATION OF RULES FOR

25 MATCHING CONTRIBUTIONS.—The rules of 


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1 clause (ii) of paragraph (12)(B) and 

2 clauses (iii) and (iv) of paragraph (13)(D) 

3 shall apply for purposes of clause (i) but 

4 the rule of clause (iii) of paragraph 

5 (12)(B) shall not apply for such purposes. 

6 The rate of matching contribution for each 

7 incremental deferral must be at least as 

8 high as the rate specified in clause (i), and 

9 may be higher, so long as such rate does 

10 not increase as an employee’s rate of elec11 tive contributions increases.’’. 

12 (b) MATCHING CONTRIBUTIONS AND EMPLOYEE

13 CONTRIBUTIONS.—Subsection (m) of section 401 of the 

14 Internal Revenue Code of 1986 is amended by redesig15 nating paragraph (13) as paragraph (14) and by inserting 

16 after paragraph (12) the following new paragraph: 

17 ‘‘(13) ALTERNATIVE METHOD FOR SECURE DE18 FERRAL ARRANGEMENTS.—A defined contribution 

19 plan shall be treated as meeting the requirements of 

20 paragraph (2) with respect to matching contribu21 tions and employee contributions if the plan— 

22 ‘‘(A) is a secure deferral arrangement (as 

23 defined in subsection (k)(14)), 

24 ‘‘(B) meets the requirements of clauses (ii) 

25 and (iii) of paragraph (11)(B), and 


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1 ‘‘(C) provides that matching contributions 

2 on behalf of any employee may not be made 

3 with respect to an employee’s contributions or 

4 elective deferrals in excess of 10 percent of the 

5 employee’s compensation.’’. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to plan years beginning after De8 cember 31, 2015. 

9 SEC. 10. CREDIT FOR EMPLOYERS WITH RESPECT TO MODI10 FIED SAFE HARBOR REQUIREMENTS. 

11 (a) IN GENERAL.—Subpart D of part IV of sub12 chapter A of chapter 1 of the Internal Revenue Code of 

13 1986 is amended by adding at the end the following new 

14 section: 

15 ‘‘SEC. 45S. CREDIT FOR SMALL EMPLOYERS WITH RESPECT 

16 TO MODIFIED SAFE HARBOR REQUIREMENTS 

17 FOR AUTOMATIC CONTRIBUTION ARRANGE18 MENTS. 

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

20 in the case of a small employer, the safe harbor adoption 

21 credit determined under this section for any taxable year 

22 is the amount equal to the total of the employer’s match23 ing contributions under section 401(k)(14)(D) during the 

24 taxable year on behalf of employees who are not highly 


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1 compensated employees, subject to the limitations of sub2 section (b). 

3 ‘‘(b) LIMITATIONS.— 

4 ‘‘(1) LIMITATION WITH RESPECT TO COM5 PENSATION.—The credit determined under sub6 section (a) with respect to contributions made on be7 half of an employee who is not a highly compensated 

8 employee shall not exceed 2 percent of the com9 pensation of such employee for the taxable year. 

10 ‘‘(2) LIMITATION WITH RESPECT TO YEARS OF

11 PARTICIPATION.—Credit shall be determined under 

12 subsection (a) with respect to contributions made on 

13 behalf of an employee who is not a highly com14 pensated employee only during the first 5 years such 

15 employee participates in the qualified automatic con16 tribution arrangement. 

17 ‘‘(c) DEFINITIONS.— 

18 ‘‘(1) IN GENERAL.—Any term used in this sec19 tion which is also used in section 401(k)(14) shall 

20 have the same meaning as when used in such sec21 tion. 

22 ‘‘(2) SMALL EMPLOYER.—The term ‘small em23 ployer’ means an eligible employer (as defined in 

24 section 408(p)(2)(C)(i)). 


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1 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 

2 shall be allowable under this title for any contribution with 

3 respect to which a credit is allowed under this section.’’. 

4 (b) CREDIT TO BE PART OF GENERAL BUSINESS

5 CREDIT.—Subsection (b) of section 38 of the Internal 

6 Revenue Code of 1986 is amended— 

7 (1) by striking ‘‘plus’’ at the end of paragraph 

8 (35), 

9 (2) by striking the period at the end of para10 graph (36) and inserting ‘‘, plus’’, and 

11 (3) by adding at the end the following new 

12 paragraph: 

13 ‘‘(37) the safe harbor adoption credit deter14 mined under section 45S.’’. 

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

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

17 of the Internal Revenue Code of 1986 is amended by add18 ing after the item relating to section 45R the following 

19 new item: 

‘‘Sec. 45S. Credit for small employers with respect to modified safe harbor requirements for automatic contribution arrangements.’’. 

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

21 this section shall apply to taxable years that include any 

22 portion of a plan year beginning after December 31, 2015. 


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1 SEC. 11. MODIFICATION OF REGULATIONS. 

2 The Secretary of the Treasury shall promulgate regu3 lations or other guidance that— 

4 (1) simplify and clarify the rules regarding the 

5 timing of participant notices required under section 

6 401(k)(13)(E) of the Internal Revenue Code of 

7 1986, with specific application to— 

8 (A) plans that allow employees to be eligi9 ble for participation immediately upon begin10 ning employment, and 

11 (B) employers with multiple payroll and 

12 administrative systems, and 

13 (2) simplify and clarify the automatic escalation 

14 rules under sections 401(k)(13)(C)(iii) and 

15 401(k)(14)(C) of the Internal Revenue Code of 1986 

16 in the context of employers with multiple payroll and 

17 administrative systems. 

18 Such regulations or guidance shall address the particular 

19 case of employees within the same plan who are subject 

20 to different notice timing and different percentage require21 ments, and provide assistance for plan sponsors in man22 aging such cases. 

23 SEC. 12. LIMITED TRANSFER OF UNUSED BALANCE IN 

24 FLEXIBLE SPENDING ARRANGEMENT. 

25 (a) IN GENERAL.—Section 125 of the Internal Rev26 enue Code of 1986 is amended by redesignating subVerDate Sep 11 2014 04:40 Dec 20, 2014 Jkt 049200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\H5875.IH H5875

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1 sections (k) and (l) as subsections (l) and (m), respec2 tively, and by inserting after subsection (h) the following 

3 new subsection: 

4 ‘‘(k) SPECIAL RULE FOR UNUSED BENEFITS IN

5 FLEXIBLE SPENDING ARRANGEMENTS.— 

6 ‘‘(1) IN GENERAL.—For purposes of this title, 

7 a plan or other arrangement shall not fail to be 

8 treated as a cafeteria plan or flexible spending ar9 rangement merely because such arrangement pro10 vides for qualified retirement distributions. 

11 ‘‘(2) QUALIFIED RETIREMENT DISTRIBUTION.— 

12 ‘‘(A) IN GENERAL.—For purposes of this 

13 section, the term ‘qualified retirement distribu14 tion’ means any distribution to an individual of 

15 all or a portion of the employee’s account under 

16 such arrangement, but only to the extent— 

17 ‘‘(i) the amount does not exceed the 

18 lesser of— 

19 ‘‘(I) $250, or 

20 ‘‘(II) the unused benefits with re21 spect to the arrangement, and 

22 ‘‘(ii) the amount received is paid in 

23 the form of a direct trustee-to-trustee 

24 transfer to a qualified retirement plan (as 

25 defined in section 4974(c)), or an eligible 


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1 deferred compensation plan (as defined in 

2 section 457(b)) of an eligible employer de3 scribed in section 457(e)(1)(A), maintained 

4 by the same employer as the employer 

5 maintaining the cafeteria plan or flexible 

6 spending arrangement of the individual. 

7 ‘‘(B) UNUSED BENEFITS.—For purposes 

8 of this paragraph, the term ‘unused benefits’ 

9 means, with respect to an employee, the excess 

10 of— 

11 ‘‘(i) the maximum amount of reim12 bursement allowable to the employee dur13 ing a plan year under a flexible spending 

14 arrangement, over 

15 ‘‘(ii) the actual amount of reimburse16 ment during such year under such ar17 rangement. 

18 ‘‘(C) SPECIAL RULES FOR TREATMENT OF

19 CONTRIBUTIONS TO RETIREMENT PLANS.—For 

20 purposes of this title, qualified retirement dis21 tributions— 

22 ‘‘(i) shall be treated as elective defer23 rals (as defined in section 402(g)(3)) 

24 under an annuity contract described in sec25 tion 403(b), 


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1 ‘‘(ii) shall be treated as elective defer2 rals (as so defined) in the case of contribu3 tions to a qualified cash or deferred ar4 rangement (as defined in section 401(k)) 

5 under a plan which is described in section 

6 401(a) which includes a trust which is ex7 empt from tax under section 501(a), 

8 ‘‘(iii) shall be treated as deferred com9 pensation in the case of contributions to an 

10 eligible deferred compensation plan (as de11 fined in section 457(b)) maintained by an 

12 employer described in section 457(e)(1)(A), 

13 and 

14 ‘‘(iv) shall be treated in the manner 

15 designated for purposes of section 408 or 

16 408A in the case of contributions to an in17 dividual retirement plan.’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to plan years ending after the date 

20 of the enactment of this Act. 

21 SEC. 13. PRIOR YEARS COMPENSATION TAKEN INTO AC22 COUNT IN DETERMINING MAXIMUM RETIRE23 MENT SAVINGS DEDUCTION. 

24 (a) IN GENERAL.—Subparagraph (B) of section 

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1 ed by inserting ‘‘or the preceding taxable year’’ after 

2 ‘‘such taxable year’’. 

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

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 14. EXPANDING SMALL EMPLOYER PENSION PLAN 

7 STARTUP COST CREDIT. 

8 (a) IN GENERAL.— 

9 (1) INCLUDING STARTUP COSTS FOR EM10 PLOYER-ESTABLISHED IRAS.—Paragraph (2) of sec11 tion 45E(d) of the Internal Revenue Code of 1986 

12 (defining eligible employer plan) is amended by 

13 striking ‘‘means a qualified employer plan’’ and all 

14 that follows and inserting: ‘‘means— 

15 ‘‘(A) a qualified employer plan within the 

16 meaning of section 4972(d), and 

17 ‘‘(B) a plan of which an automatic deferral 

18 IRA described in section 408B is a part.’’. 

19 (2) ADDITIONAL CREDIT AMOUNT.— 

20 (A) IN GENERAL.—Subsection (a) of sec21 tion 45E of such Code is amended by striking 

22 ‘‘50 percent of’’ and all that follows and insert23 ing ‘‘the sum of— 


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1 ‘‘(1) the applicable percentage of the qualified 

2 startup costs paid or incurred by the taxpayer dur3 ing the taxable year, plus 

4 ‘‘(2) $25 multiplied by the number of employees 

5 of the employer who participate in any eligible em6 ployer plan of the employer for the first time in such 

7 taxable year.’’. 

8 (B) APPLICABLE PERCENTAGE.—Sub9 section (d) of section 45E of such Code is 

10 amended by adding at the end the following 

11 new paragraph: 

12 ‘‘(4) APPLICABLE PERCENTAGE.—The applica13 ble percentage is— 

14 ‘‘(A) in the case of a plan described in sub15 section (d)(2)(A), 75 percent, or 

16 ‘‘(B) in the case of a plan described in 

17 subsection (d)(2)(B), 50 percent.’’. 

18 (C) CONFORMING AMENDMENT.—Para19 graph (2) of section 45E(c) of such Code (de20 fining eligible employer) is amended— 

21 (i) by striking ‘‘qualified employer 

22 plan’’ in each place it appears and insert23 ing ‘‘eligible employer plan’’, and 

24 (ii) by striking ‘‘QUALIFIED’’ in the 

25 heading thereof and inserting ‘‘ELIGIBLE’’. 


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1 (3) INCREASED LIMITATION.—Paragraph (1) of 

2 section 45E(b) of such Code is amended by striking 

3 ‘‘$500’’ and inserting ‘‘$750 ($2,000 in the case of 

4 qualified startup costs attributable to a plan de5 scribed in subsection (d)(2)(A))’’. 

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

7 this section shall apply to costs paid or incurred in taxable 

8 years beginning after the date of the enactment of this 

9 Act. 

10 SEC. 15. FINANCIAL EDUCATION. 

11 (a) RETIREMENT PLAN EDUCATION FOR SMALL

12 BUSINESSES.—Not later than 6 months after the date of 

13 the enactment of this Act— 

14 (1) the Department of the Treasury Office of 

15 Financial Education, in consultation with the De16 partment of Labor, shall develop and implement an 

17 outreach plan to educate small businesses on the 

18 types of retirement plans available and the benefits 

19 and requirements of such plans, and 

20 (2) the Secretary of the Treasury and the Sec21 retary of Labor shall develop recommendations for 

22 small businesses in order to improve retirement out23 comes. Such recommendations shall take into ac24 count established behavioral trends of employee in25 vestment and the effect of default design features 


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1 such as auto escalation, expansion of auto rollovers, 

2 auto diversification for near retirees, and automatic 

3 forms of distribution. 

4 (b) FINANCIAL LITERACY.— 

5 (1) IN GENERAL.—Not later than 1 year after 

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

7 of the Treasury, in consultation with the Secretary 

8 of Education, shall develop sample age-appropriate 

9 curricula to be made available for financial literacy 

10 education in elementary and secondary schools. 

11 (2) CONTENT OF CURRICULA.—Such curricula 

12 shall include the following: 

13 (A) How to balance a checkbook, read a 

14 credit card statement, and calculate interest 

15 rates. 

16 (B) What a pay stub is and why Federal 

17 and State income taxes and Social Security and 

18 Medicare taxes are withheld from wages. 

19 (C) The differences between various types 

20 of bank accounts. 

21 (D) The significance of a credit score and 

22 how to read credit reports. 

23 (E) The marketing techniques frequently 

24 used by individuals and businesses to attract 

25 patrons. 


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1 (F) The importance of saving for college 

2 and retirement, including the various methods 

3 for saving such as traditional pensions, 401(k)s, 

4 and IRAs. 

5 SEC. 16. SMALL EMPLOYER PLANS. 

6 (a) IN GENERAL.—Paragraph (11) of section 401(k) 

7 of the Internal Revenue Code of 1986 is amended by add8 ing the following at the end thereof: 

9 ‘‘(E) DEFERRAL ONLY SMALL EMPLOYER

10 PLAN.— 

11 ‘‘(i) IN GENERAL.—In the case of a 

12 plan described in clause (ii)— 

13 ‘‘(I) the amount described in sub14 paragraph (B)(i)(I) shall be $10,000, 

15 in lieu of the amount in effect under 

16 section 408(p)(2)(A)(ii), 

17 ‘‘(II) such $10,000 amount shall, 

18 in the case years beginning after De19 cember 31, 2016, be adjusted as de20 scribed in section 408(p)(2)(E)(ii) ex21 cept that the base period taken into 

22 account shall be the calendar quarter 

23 beginning July 1, 2015, 


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1 ‘‘(III) subclause (II) of subpara2 graph (B)(i) and clause (ii) of sub3 paragraph (B) shall not apply, and 

4 ‘‘(IV) section 414(v) shall not 

5 apply. 

6 ‘‘(ii) PLAN DESCRIBED.—A plan is de7 scribed in this clause if the plan satisfies 

8 the following requirements: 

9 ‘‘(I) Such plan satisfies the re10 quirements of this paragraph, as 

11 modified by clause (i). 

12 ‘‘(II) The plan includes a quali13 fied automatic contribution arrange14 ment, as defined in paragraph (13), 

15 except that subparagraph (D) of para16 graph (13) shall not apply and the 

17 qualified percentage shall be deter18 mined by reference to subclauses (I), 

19 (II), (III), and (IV) of paragraph 

20 (13)(C)(iii). 

21 ‘‘(III) The plan does not permit 

22 any participant or beneficiary to re23 ceive or maintain a loan from the 

24 plan. 


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1 ‘‘(IV) The plan does not permit 

2 hardship distributions described in 

3 paragraph (2)(B)(i)(IV) except to the 

4 extent any such distribution is 

5 deemed, under regulations prescribed 

6 by the Secretary, to be on account of 

7 an immediate and heavy financial 

8 need of the employee and necessary to 

9 satisfy an immediate and heavy finan10 cial need of the employee. 

11 ‘‘(V) The plan is maintained pur12 suant to a model plan document pub13 lished by the Secretary.’’. 

14 (b) SIMPLIFICATION.— 

15 (1) MODEL PLAN.—Within one year of the date 

16 of the enactment of this Act, the Secretary of the 

17 Treasury shall publish a model plan that may be 

18 used to satisfy the requirement of subclause (V) of 

19 section 401(k)(11)(E)(ii) of the Internal Revenue 

20 Code of 1986. 

21 (2) PROTECTION AGAINST LOSS.—Within 120 

22 days of the date of the enactment of this Act, the 

23 Secretary of Labor shall amend Department of 

24 Labor Regulation section 2550.404c–5(e)(4)(iv)(B) 

25 so that, in the case of a plan described in section 


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1 401(k)(11)(E) of such Code ‘‘four years’’ shall be 

2 substituted for ‘‘120 days’’. 

3 (3) CLARIFYING DUTIES AND REDUCING BUR4 DENS FOR MULTIPLE EMPLOYER PLANS.—Within 

5 one year of the date of the enactment of this Act, 

6 the Secretary of Labor shall— 

7 (A) publish rules clarifying the extent to 

8 which the fiduciary duties, if any, of a partici9 pating employer fiduciary with respect to a plan 

10 described in section 413(c) of such Code are 

11 limited to— 

12 (i) the selection and monitoring of the 

13 named fiduciary, and 

14 (ii) the investment and management 

15 of the portion of the plan’s assets attrib16 utable to employees of the employer to the 

17 extent not otherwise delegated to another 

18 fiduciary, and 

19 (B) prescribe interim final regulations pro20 viding simplified means by which plans de21 scribed in section 413(c) of such Code may sat22 isfy the requirements of sections 102, 103, and 

23 105 of the Employee Retirement Income Secu24 rity Act of 1974. 


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1 For purposes of this paragraph, the term ‘‘partici2 pating employer fiduciary’’ means the participating 

3 employer, any employee of such participating em4 ployer that serves as fiduciary, any committee of 

5 such employees, and any other person whose fidu6 ciaries duties with respect to the plan relate solely 

7 to the participating employer and not to the oper8 ation of the plan with respect to all participating 

9 employers. 

10 (4) ELIMINATION OF DISINCENTIVE TO POOL11 ING.—Not later than one year after the date of the 

12 enactment of this Act, the Secretary of the Treasury 

13 shall prescribe final regulations under which a plan 

14 described in section 413(c) of such Code may be 

15 treated as satisfying the qualification requirements 

16 of section 401(a) of such Code despite the violation 

17 of such requirements with respect to one or more 

18 participating employers without regard to whether 

19 such violation continues. Solely for this purpose, a 

20 plan shall be treated as violating the qualification re21 quirements of section 401(a) of such Code with re22 spect to a participating employer if such employer 

23 has failed to provide the plan sponsor with the infor24 mation needed to comply with such requirements 

25 and such failure has continued over a period of time 


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1 that clearly demonstrates a lack of commitment to 

2 compliance. Such rules may require that the portion 

3 of the plan attributable to such participating em4 ployers be spun off to plans maintained by such em5 ployers. 

6 (c) EFFECTIVE DATE.— 

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendments made by this section 

9 shall apply to years beginning after December 31, 

10 2015. 

11 (2) EXCEPTION.—Subsection (b) shall apply as 

12 of the date of the enactment of this Act. 

13 SEC. 17. MODIFICATION OF ERISA RULES RELATING TO 

14 MULTIPLE EMPLOYER DEFINED CONTRIBU15 TION PLANS. 

16 (a) IN GENERAL.— 

17 (1) REQUIREMENT OF COMMON INTEREST.— 

18 Section 3(2) of the Employee Retirement Income Se19 curity Act of 1974 is amended by adding at the end 

20 the following: 

21 ‘‘(C)(i) A qualified multiple employer plan shall 

22 not fail to be treated as an employee pension benefit 

23 plan or pension plan solely because the employers 

24 maintaining the plan share no common interest. 


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1 ‘‘(ii) For purposes of this subparagraph, the 

2 term ‘qualified multiple employer plan’ means a plan 

3 described in section 413(c) of the Internal Revenue 

4 Code of 1986 which— 

5 ‘‘(I) is an individual account plan with re6 spect to which the requirements of clauses (iii), 

7 (iv), and (v) are met, and 

8 ‘‘(II) includes in its annual report required 

9 to be filed under section 104(a) the name and 

10 identifying information of each employer main11 taining the plan. 

12 ‘‘(iii) The requirements of this clause are met 

13 if, under the plan, each employer maintaining the 

14 plan retains fiduciary responsibility for— 

15 ‘‘(I) the selection and monitoring of the 

16 named fiduciary, and 

17 ‘‘(II) the investment and management of 

18 the portion of the plan’s assets attributable to 

19 employees of the employer to the extent not 

20 otherwise delegated to another fiduciary. 

21 ‘‘(iv) The requirements of this clause are met if, 

22 under the plan, an employer maintaining the plan is 

23 not subject to unreasonable restrictions, fees, or pen24 alties by reason of ceasing to maintain, or otherwise 

25 transferring assets from, the plan. 


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1 ‘‘(v) The requirements of this clause are met if 

2 each employer maintaining the plan is an eligible 

3 employer as defined in section 408(p)(2)(C)(i) of the 

4 Internal Revenue Code of 1986, applied— 

5 ‘‘(I) by substituting ‘500’ for ‘100’ in sub6 clause (I) thereof, 

7 ‘‘(II) by substituting ‘5’ for ‘2’ each place 

8 it appears in subclause (II) thereof, and 

9 ‘‘(III) without regard to the last sentence 

10 of subclause (II) thereof.’’. 

11 (2) SIMPLIFIED REPORTING FOR SMALL MUL12 TIPLE EMPLOYER PLANS.—Section 104(a) of such 

13 Act (29 U.S.C. 1024(a)) is amended by adding at 

14 the end the following: 

15 ‘‘(7)(A) In the case of any eligible small multiple em16 ployer plan, the Secretary may by regulation waive the re17 quirement under section 103(a)(3) to engage an inde18 pendent qualified public accountant in cases where the 

19 Secretary determines it appropriate. 

20 ‘‘(B) For purposes of this paragraph, the term ‘eligi21 ble small multiple employer plan’ means, with respect to 

22 any plan year— 

23 ‘‘(i) a qualified multiple employer plan, as de24 fined in section 3(2)(C)(ii), or 


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1 ‘‘(ii) any other plan described in section 413(c) 

2 of the Internal Revenue Code of 1986 that satisfies 

3 the requirements of clause (v) of section 3(2)(C).’’. 

4 (b) CONFORMING AMENDMENT.—Section 3(2)(A) of 

5 such Act is amended by striking ‘‘Except as provided in 

6 subparagraph (B)’’ and inserting ‘‘Except as provided in 

7 subparagraphs (B) and (C)’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to years beginning after December 

10 31, 2015. 

11 SEC. 18. CLARIFICATION OF TREATMENT OF INDIVIDUAL 

12 RETIREMENT PLANS WITH PAYROLL DEDUC13 TION. 

14 (a) IN GENERAL.—Section 3(2) of the Employee Re15 tirement Income Security Act of 1974 (29 U.S.C. 

16 1002(2)), as amended by this Act, is amended by adding 

17 at the end the following new subparagraph: 

18 ‘‘(E) Neither an individual retirement plan (as de19 fined in section 7701(a)(37) of the Internal Revenue Code 

20 of 1986) nor an automatic deferral IRA arrangement (as 

21 described in section 408B of such Code) maintained in 

22 connection with any such individual retirement plan shall 

23 be considered a pension plan merely because an employer 

24 establishes a payroll deduction program for the purpose 


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1 of enabling employees to make voluntary contributions to 

2 such account or annuity.’’. 

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

4 this section shall take effect on the date of the enactment 

5 of this Act. 

6 SEC. 19. DISCLOSURE REGARDING LIFETIME INCOME. 

7 (a) IN GENERAL.—Subparagraph (B) of section 

8 105(a)(2) of the Employee Retirement Income Security 

9 Act of 1974 (29 U.S.C. 1025(a)(2)) is amended— 

10 (1) in clause (i), by striking ‘‘and’’ at the end; 

11 (2) in clause (ii), by striking ‘‘diversification.’’ 

12 and inserting ‘‘diversification, and’’; and 

13 (3) by inserting at the end the following: 

14 ‘‘(iii) the lifetime income disclosure 

15 described in subparagraph (D)(i). 

16 In the case of pension benefit statements de17 scribed in clause (i) of paragraph (1)(A), a life18 time income disclosure under clause (iii) of this 

19 subparagraph shall only be required to be in20 cluded in one pension benefit statement during 

21 any one 12-month period.’’. 

22 (b) LIFETIME INCOME.—Paragraph (2) of section 

23 105(a) of such Act (29 U.S.C. 1025(a)) is amended by 

24 adding at the end the following new subparagraph: 

25 ‘‘(D) LIFETIME INCOME DISCLOSURE.— 


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1 ‘‘(i) IN GENERAL.— 

2 ‘‘(I) DISCLOSURE.—A lifetime in3 come disclosure shall set forth the life4 time income stream equivalent of the 

5 total benefits accrued with respect to 

6 the participant or beneficiary. 

7 ‘‘(II) LIFETIME INCOME STREAM

8 EQUIVALENT OF THE TOTAL BENE9 FITS ACCRUED.—For purposes of this 

10 subparagraph, the term ‘lifetime in11 come stream equivalent of the total 

12 benefits accrued’ means the amount of 

13 monthly payments the participant or 

14 beneficiary would receive if the total 

15 accrued benefits of such participant or 

16 beneficiary were used to provide life17 time income streams described in sub18 clause (III), based on assumptions 

19 specified in rules prescribed by the 

20 Secretary. 

21 ‘‘(III) LIFETIME INCOME

22 STREAMS.—The lifetime income 

23 streams described in this subclause 

24 are a qualified joint and survivor an25 nuity (as defined in section 205(d)), 


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1 based on assumptions specified in 

2 rules prescribed by the Secretary, in3 cluding the assumption that the par4 ticipant or beneficiary has a spouse of 

5 equal age, and a single life annuity. 

6 Such lifetime income streams may 

7 have a term certain or other features 

8 to the extent permitted under rules 

9 prescribed by the Secretary. 

10 ‘‘(ii) MODEL DISCLOSURE.—Not later 

11 than 1 year after the date of the enact12 ment of the Lifetime Income Disclosure 

13 Act, the Secretary shall issue a model life14 time income disclosure, written in a man15 ner so as to be understood by the average 

16 plan participant, that— 

17 ‘‘(I) explains that the lifetime in18 come stream equivalent is only pro19 vided as an illustration; 

20 ‘‘(II) explains that the actual 

21 payments under the lifetime income 

22 stream described in clause (i)(III) 

23 that may be purchased with the total 

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1 tially from the lifetime income stream 

2 equivalent in the disclosures; 

3 ‘‘(III) explains the assumptions 

4 upon which the lifetime income stream 

5 equivalent was determined; and 

6 ‘‘(IV) provides such other similar 

7 explanations as the Secretary con8 siders appropriate. 

9 ‘‘(iii) ASSUMPTIONS AND RULES.— 

10 Not later than 1 year after the date of the 

11 enactment of the Lifetime Income Disclo12 sure Act, the Secretary shall— 

13 ‘‘(I) prescribe assumptions that 

14 administrators of individual account 

15 plans may use in converting total ac16 crued benefits into lifetime income 

17 stream equivalents for purposes of 

18 this subparagraph; and 

19 ‘‘(II) issue interim final rules 

20 under clause (i). 

21 In prescribing assumptions under sub22 clause (I), the Secretary may prescribe a 

23 single set of specific assumptions (in which 

24 case the Secretary may issue tables or fac25 tors that facilitate such conversions), or 


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1 ranges of permissible assumptions. To the 

2 extent that an accrued benefit is or may be 

3 invested in a lifetime income stream de4 scribed in clause (i)(III), the assumptions 

5 prescribed under subclause (I) shall, to the 

6 extent appropriate, permit administrators 

7 of individual account plans to use the 

8 amounts payable under such lifetime in9 come stream as a lifetime income stream 

10 equivalent. 

11 ‘‘(iv) LIMITATION ON LIABILITY.—No 

12 plan fiduciary, plan sponsor, or other per13 son shall have any liability under this title 

14 solely by reason of the provision of lifetime 

15 income stream equivalents which are de16 rived in accordance with the assumptions 

17 and rules described in clause (iii) and 

18 which include the explanations contained in 

19 the model lifetime income disclosure de20 scribed in clause (ii). This clause shall 

21 apply without regard to whether the provi22 sion of such lifetime income stream equiva23 lent is required by subparagraph (B)(iii). 

24 ‘‘(v) EFFECTIVE DATE.—The require25 ment in subparagraph (B)(iii) shall apply 


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1 to pension benefit statements furnished 

2 more than 12 months after the latest of 

3 the issuance by the Secretary of— 

4 ‘‘(I) interim final rules under 

5 clause (i); 

6 ‘‘(II) the model disclosure under 

7 clause (ii); or 

8 ‘‘(III) the assumptions under 

9 clause (iii).’’. 

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

11 this section shall take effect on the date of the enactment 

12 of this Act. 

13 SEC. 20. LIFETIME INCOME SAFE HARBOR. 

14 Section 404 of the Employee Retirement Income Se15 curity Act of 1974 (29 U.S.C. 1104) is amended by adding 

16 at the end the following: 

17 ‘‘(e) SAFE HARBOR FOR ANNUITY SELECTION.— 

18 ‘‘(1) IN GENERAL.—With respect to the selec19 tion of an insurer and a guaranteed retirement in20 come contract, the requirements of subsection 

21 (a)(1)(B) will be deemed to be satisfied if a fidu22 ciary— 

23 ‘‘(A) engages in an objective, thorough and 

24 analytical search for the purpose of identifying 


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1 insurers from which to purchase guaranteed re2 tirement income contracts; 

3 ‘‘(B) with respect to each insurer identified 

4 by the fiduciary under subparagraph (A)— 

5 ‘‘(i) considers the financial capability 

6 of such insurer to satisfy its obligations 

7 under the guaranteed retirement income 

8 contract; and 

9 ‘‘(ii) considers the cost (including fees 

10 and commissions) of the guaranteed retire11 ment income contract offered by the in12 surer in relation to the benefits and prod13 uct features of the contract and adminis14 trative services to be provided under such 

15 contract; and 

16 ‘‘(C) on the basis of the foregoing, con17 cludes that— 

18 ‘‘(i) at the time of the selection, the 

19 insurer is financially capable of satisfying 

20 its obligations under the guaranteed retire21 ment income contract; and 

22 ‘‘(ii) the cost (including fees and com23 missions) of the selected guaranteed retire24 ment income contract is reasonable in rela25 tion to the benefits and product features of 


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1 the contract and the administrative serv2 ices to be provided under such contract. 

3 ‘‘(2) FINANCIAL CAPABILITY OF THE IN4 SURER.—For purposes of this section, a fiduciary 

5 will be deemed to satisfy the requirements of para6 graphs (1)(B)(i) and (1)(C)(i) if— 

7 ‘‘(A) the fiduciary obtains written rep8 resentations from the insurer that— 

9 ‘‘(i) the insurer is licensed to offer 

10 guaranteed retirement income contracts; 

11 ‘‘(ii) the insurer, at the time of selec12 tion and for each of the immediately pre13 ceding seven years— 

14 ‘‘(I) operates under a certificate 

15 of authority from the Insurance Com16 missioner of its domiciliary State that 

17 has not been revoked or suspended; 

18 ‘‘(II) has filed audited financial 

19 statements in accordance with the 

20 laws of its domiciliary State under ap21 plicable statutory accounting prin22 ciples; 

23 ‘‘(III) maintains (and has main24 tained) reserves that satisfies all the 


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1 statutory requirements of all States 

2 where the insurer does business; and 

3 ‘‘(IV) is not operating under an 

4 order of supervision, rehabilitation, or 

5 liquidation; and 

6 ‘‘(iii) the insurer undergoes, at least 

7 every five years, a financial examination 

8 (within the meaning of the law of its domi9 ciliary State) by the Insurance Commis10 sioner of the domiciliary State (or rep11 resentative, designee, or other party ap12 proved thereby); 

13 ‘‘(B) if, following the issuance of the rep14 resentations described in clauses (i) through 

15 (iii) of subparagraph (A), there is any change 

16 that would preclude the insurer from making 

17 the same representations at the time of 

18 issuance of the guaranteed retirement income 

19 contract, the insurer shall notify the fiduciary, 

20 in advance of the issuance of any guaranteed 

21 retirement income contract, that the fiduciary 

22 can no longer rely on one or more of the rep23 resentations; and 

24 ‘‘(C) the fiduciary has not received the no25 tification described in subparagraph (B) and 


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1 has no other facts that would cause it to ques2 tion the representations described in clauses (i) 

3 through (iii) of subparagraph (A). 

4 ‘‘(3) The final regulation described in (a) shall 

5 clarify that the standard of care is not construed to 

6 require a fiduciary to select the lowest cost contract. 

7 Accordingly, a fiduciary may consider the value, in8 cluding features and benefits of the contract and at9 tributes of the insurer in conjunction with the con10 tract’s cost. Attributes of the insurer that may be 

11 considered may include, without limitation, the 

12 issuer’s financial strength. 

13 ‘‘(4) TIME OF SELECTION.— 

14 ‘‘(A) For purposes of paragraph (1), the 

15 ‘time of selection’ may be either— 

16 ‘‘(i) the time that the insurer and con17 tract are selected for distribution of bene18 fits to a specific participant or beneficiary; 

19 or 

20 ‘‘(ii) the time that the insurer and 

21 contract are selected to provide benefits at 

22 future dates to participants or bene23 ficiaries, provided that the selecting fidu24 ciary periodically reviews the continuing 

25 appropriateness of the conclusion described 


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1 in paragraph (1)(C), taking into account 

2 the considerations described in paragraph 

3 (1). 

4 For purposes of this paragraph, a fiduciary is 

5 not required to review the appropriateness of 

6 this conclusion following the purchase of any 

7 contract(s) for specific participants or bene8 ficiaries. 

9 ‘‘(B) For purposes of paragraph (4)(A)(ii), 

10 a fiduciary will be deemed to have conducted a 

11 periodic review of the financial capability of the 

12 insurer if the fiduciary obtains the written rep13 resentations described in clauses (i) through 

14 (iii) of paragraph (2)(A) on an annual basis, 

15 unless, in the interim, the fiduciary has received 

16 the notice described in paragraph (2)(B) or oth17 erwise becomes aware of facts that would cause 

18 it to question the such representations. 

19 ‘‘(5) LIMITED LIABILITY.—A fiduciary that is 

20 deemed to satisfy the requirements of this section 

21 shall not be liable following the distribution of any 

22 benefit or the investment by or on behalf of a partic23 ipant or beneficiary pursuant to the selected guaran24 teed retirement income contract for any losses that 

25 may result to the participant or beneficiary due to 


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1 an insurer’s inability to satisfy its financial obliga2 tions under the terms of such contract. 

3 ‘‘(6) DEFINITIONS.—For purposes of this sec4 tion— 

5 ‘‘(A) INSURER.—The term ‘insurer’ means 

6 an insurance company, insurance service or in7 surance organization qualified to do business in 

8 a State; and includes affiliates of such compa9 nies to the extent the affiliate is licensed to 

10 offer guaranteed retirement income contracts. 

11 ‘‘(B) GUARANTEED RETIREMENT INCOME

12 CONTRACT.—The term ‘guaranteed retirement 

13 income contract’ means an annuity contract for 

14 a fixed term or a contract (or provision or fea15 ture thereof) designed to provide a participant 

16 guaranteed benefits annually (or more fre17 quently) for at least the remainder of the life of 

18 the participant or joint lives of the participant 

19 or the participant’s designated beneficiary as 

20 part of an individual account plan. This section 

21 sets forth an optional means by which a plan fi22 duciary will be considered to satisfy the respon23 sibilities set forth in section 404(a)(1)(B) with 

24 respect to the selection of insurers and guaran25 teed retirement income contracts. This section 


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1 does not establish minimum requirements or 

2 the exclusive means for satisfying these respon3 sibilities.’’. 

Æ 


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