I 

111TH CONGRESS 

2D SESSION H. R. 6099 

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 

AUGUST 10, 2010 

Mr. NEAL of Massachusetts (for himself, Mr. STARK, Ms. SCHWARTZ, and Mr. 

BLUMENAUER) introduced the following bill; which was referred to the 

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

Education and Labor, 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. 

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

5 of 2010’’. 


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1 SEC. 2. EMPLOYEES NOT COVERED BY QUALIFYING RE2 TIREMENT PLANS OR ARRANGEMENTS ENTI3 TLED TO PARTICIPATE IN AUTOMATIC IRA 

4 ARRANGEMENTS. 

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

6 A of chapter 1 of the Internal Revenue Code of 1986 (re7 lating to pension, profit-sharing, stock bonus plans, etc.) 

8 is amended by inserting after section 408A the following 

9 new section: 

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

11 WORK. 

12 ‘‘(a) REQUIREMENT TO PROVIDE AUTOMATIC IRA 

13 ARRANGEMENT.—Each covered employer shall make 

14 available to each qualifying employee of the employer for 

15 the calendar year an automatic IRA arrangement. 

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

17 section— 

18 ‘‘(1) IN GENERAL.—Except as otherwise pro19 vided in this subsection or subsection (c)(2), the 

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

21 year, an employer which does not maintain a quali22 fying plan or arrangement described in section 

23 219(g)(5) for the calendar year. 

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

25 arrangement shall not be taken into account for pur26 poses of paragraph (1) if— 


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

2 of the first day of the preceding calendar year, 

3 or 

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

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

7 plan sponsor, no employer contribution has 

8 been made to the plan or arrangement for the 

9 2-plan-year period ending with the last plan 

10 year ending in the second preceding calendar 

11 year and it is not reasonable to assume that an 

12 employer contribution will be made for the last 

13 plan year ending in the preceding calendar 

14 year. 

15 ‘‘(3) EXCEPTION FOR CERTAIN SMALL AND

16 NEW EMPLOYERS.— 

17 ‘‘(A) IN GENERAL.—The term ‘covered em18 ployer’ does not include an employer for a cal19 endar year if the employer either— 

20 ‘‘(i) did not employ more than 10 em21 ployees who received at least $5,000 of 

22 compensation (as defined in section 

23 3401(a)) from the employer for the pre24 ceding calendar year, 


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1 ‘‘(ii) did not normally employ more 

2 than 10 employees on a typical business 

3 day of the preceding calendar year, or 

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

5 during the calendar year and the preceding 

6 calendar year. 

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

8 the number of employees for purposes of sub9 paragraph (A)— 

10 ‘‘(i) rules consistent with any rules 

11 applicable in determining the number of 

12 employees for purposes of section 

13 408(p)(2)(C) and section 4980B(d) shall 

14 apply, 

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

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

17 shall be treated as 1 individual, and 

18 ‘‘(iii) any reference to an employer 

19 shall include a reference to any predecessor 

20 employer. 

21 ‘‘(4) EXCEPTION FOR GOVERNMENTS AND

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

23 include— 

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

25 section 414(d), or 


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1 ‘‘(B) a church or a convention or associa2 tion of churches which is exempt from tax 

3 under section 501. 

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

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

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

7 shall be treated as a single employer. 

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

9 section— 

10 ‘‘(1) IN GENERAL.—The term ‘qualifying em11 ployee’ means any employee of the employer who is 

12 not an excluded employee. 

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

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

15 qualifying plans or arrangements described in 

16 section 219(g)(5), and 

17 ‘‘(B) the employees of a subsidiary, divi18 sion, or other major business unit are generally 

19 not eligible to participate in any such qualifying 

20 plan or arrangement, 

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

22 be treated as a covered employer with respect to 

23 such employees (other than excluded employees), 

24 and such employees (other than excluded employees) 

25 shall be treated as qualifying employees, but only if 


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1 there are 50 or more ineligible employees of such 

2 subsidiary, division or other major business unit con3 stituting at least 10 percent of the employees of the 

4 employer (other than excludable employees). 

5 ‘‘(3) EXCLUDED EMPLOYEES.— 

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

7 employee’ means an employee of the employer 

8 who is an excludable employee and who is in a 

9 class or category that the employer excludes 

10 from treatment as qualifying employees. 

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

12 ‘excludable employee’ means— 

13 ‘‘(i) any employee described in section 

14 410(b)(3), 

15 ‘‘(ii) any employee who has not at16 tained the age of 18 before the beginning 

17 of the calendar year, 

18 ‘‘(iii) any employee who has not com19 pleted at least 3 months of service with the 

20 employer, 

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

22 maintains a qualifying plan or arrange23 ment which excludes employees who have 

24 not satisfied the minimum age and service 

25 requirements for participation in the plan, 


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1 any employee who has not satisfied such 

2 requirements, 

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

4 maintains a section 403(b) annuity con5 tract (including a custodial account), any 

6 employee who is permitted to be excluded 

7 from the salary reduction arrangement 

8 under section 403(b)(12), 

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

10 maintains an arrangement described in 

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

12 required to be eligible to participate in the 

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

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

15 maintains a simplified employee pension 

16 described in section 408(k), any employee 

17 who is permitted to be excluded from par18 ticipation under section 408(k)(2). 

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

20 regulations or other guidance to carry out this sub21 section, including— 

22 ‘‘(A) guidelines for determining the classes 

23 or categories of employees to be covered by an 

24 automatic IRA arrangement, 


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1 ‘‘(B) if an employer excludes employees 

2 from the automatic IRA arrangement, guide3 lines providing that the employer shall specify 

4 the classification or categories of employees who 

5 are so excluded, and 

6 ‘‘(C) rules to prevent avoidance of the re7 quirements of this section. 

8 ‘‘(d) AUTOMATIC IRA ARRANGEMENT.—For pur9 poses of this section— 

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

11 arrangement’ means an arrangement of an employer 

12 (determined without regard to whether the employer 

13 is required to maintain the arrangement)— 

14 ‘‘(A) which covers each qualifying employee 

15 of the covered employer for the calendar year, 

16 ‘‘(B) under which a qualifying employee— 

17 ‘‘(i) may elect— 

18 ‘‘(I) to contribute to an indi19 vidual retirement plan, or to purchase 

20 a qualified retirement bond instituted 

21 by or on behalf of the employee, by 

22 having the employer make periodic di23 rect deposit or other payroll deposit 

24 payments (including electronic pay25 ments) to the plan or to the retireVerDate Mar 15 2010 23:49 Aug 11, 2010 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H6099.IH H6099

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1 ment bond trustee or other agent by 

2 payroll deduction, or 

3 ‘‘(II) to have such payments paid 

4 to the employee directly in cash, 

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

6 election under clause (i) in the amount 

7 specified in paragraph (4) until the indi8 vidual specifically elects not to have such 

9 contributions or purchases made (or spe10 cifically elects to have such contributions 

11 or purchases made at a different percent12 age or in a different amount), and 

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

14 in which such amounts are invested for 

15 such year, 

16 ‘‘(C) which meets the administrative re17 quirements of paragraph (2), including the no18 tice requirement of paragraph (2)(C), and 

19 ‘‘(D) which does not charge unreasonable 

20 additional fees solely on the basis that the bal21 ance in an automatic IRA is small. 

22 ‘‘(2) ADMINISTRATIVE REQUIREMENTS.— 

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

24 this paragraph are met with respect to any 

25 automatic IRA arrangement if the employer 


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1 makes the payments elected or treated as elect2 ed under paragraph (1)(B)— 

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

4 month following the month in which the 

5 compensation otherwise would have been 

6 payable to the employee in cash, or 

7 ‘‘(ii) before such later deadline pre8 scribed by the Secretary for making such 

9 payments, but not later than the due date 

10 for the deposit of tax required to be de11 ducted and withheld under chapter 24 (re12 lating to collection of income tax at source 

13 on wages) for the payroll period to which 

14 such payments relate. 

15 ‘‘(B) TERMINATION OF EMPLOYEE PAR16 TICIPATION.—Subject to a requirement for rea17 sonable notice, an employee may elect to termi18 nate participation in the arrangement at any 

19 time during a calendar year, except that if an 

20 employee so terminates, the arrangement may 

21 provide that the employee may not elect to re22 sume participation until the beginning of the 

23 next calendar year. 

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

25 requirements of this paragraph shall not be 


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1 treated as met with respect to any year unless 

2 the employer notifies each employee eligible to 

3 participate, within a reasonable period of time 

4 before the 30th day before the beginning of 

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

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

7 such employee is so eligible), of— 

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

9 or treated as elected under paragraph 

10 (1)(B), 

11 ‘‘(ii) the opportunity to make the elec12 tion to terminate participation in the ar13 rangement under paragraph (2)(B), 

14 ‘‘(iii) the opportunity to make the 

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

16 contributions or purchases made at a dif17 ferent percentage or in a different amount, 

18 and 

19 ‘‘(iv) the opportunity under paragraph 

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

21 such amounts are invested for such year. 

22 ‘‘(D) EMPLOYEE CHOICE OF IRA.—Subject 

23 to subsection (f), if the employer so elects, the 

24 arrangement provides that an employee may 

25 elect to have contributions made to any indiVerDate Mar 15 2010 23:49 Aug 11, 2010 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H6099.IH H6099

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1 vidual retirement plan specified by the em2 ployee. 

3 ‘‘(E) EMPLOYEE CHOICE OF RETIREMENT

4 BOND.—Subject to subsection (f), if the em5 ployer so elects, the arrangement provides that 

6 an employee may elect to have payments ap7 plied toward the purchase of retirement bonds. 

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

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

10 having made an election to participate in an auto11 matic IRA arrangement— 

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

13 made an election to make contributions and 

14 payments in the amount determined under such 

15 clause, 

16 ‘‘(B) such contributions shall— 

17 ‘‘(i) if the employer has made an elec18 tion under subsection (f)(2), be transferred 

19 to an individual retirement plan of the des20 ignated trustee or issuer but only if the 

21 contributions are invested as provided in 

22 paragraph (5), or 

23 ‘‘(ii) be applied toward the purchase 

24 of a retirement bond. 


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1 ‘‘(4) AMOUNT OF CONTRIBUTIONS AND PAY2 MENTS.— 

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

4 in this paragraph is— 

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

6 ‘‘(ii) such other percentage of com7 pensation as is specified in regulations pre8 scribed by the Secretary which is not less 

9 than 2 percent or more than 6 percent. 

10 ‘‘(B) AUTHORITY TO PROVIDE FOR PERI11 ODIC INCREASES.—In the case of qualifying em12 ployees under an automatic IRA arrangement 

13 for 2 or more consecutive years, the Secretary 

14 may by regulation provide for periodic (not 

15 more frequent than annual) increases in the 

16 percentage of compensation an employee is 

17 deemed to have elected under subparagraph 

18 (A). The considerations the Secretary shall take 

19 into account in issuing any regulations under 

20 this subparagraph and subparagraph (A) shall 

21 include the potential effects on lower-income 

22 employees as well as on adequacy of savings. 

23 ‘‘(C) PERMITTED ADDITIONAL PROCE24 DURES TO LIMIT CONTRIBUTIONS.—An em25 ployer— 


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1 ‘‘(i) shall have no responsibility for 

2 any calendar year for determining whether, 

3 or ensuring that, the contributions with re4 spect to any employee do not exceed the 

5 deductible amount in effect for taxable 

6 years beginning in the calendar year under 

7 section 219(b)(5) (determined without re8 gard to subparagraph (B) thereof), and 

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

10 satisfy the requirements of this section or 

11 any other provision of this title merely be12 cause the employer chooses to limit the 

13 contributions under this subsection on be14 half of a qualifying employee for any cal15 endar year in a manner reasonably de16 signed to avoid exceeding such deductible 

17 amount. 

18 ‘‘(5) REQUIRED INVESTMENTS.—Amounts con19 tributed under paragraph (3)(B)(i) shall be invested 

20 only in one of the following investment options: 

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

22 of assets or fund that is designed to protect the 

23 principal of the individual on an ongoing basis, 

24 including passbook savings, certificates of de25 posit, insurance contracts, mutual funds, 


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1 United States savings bonds (which may be in2 dexed for inflation), and similar assets specified 

3 in regulations. 

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

5 A class of assets or funds that constitutes a 

6 qualified default investment alternative under 

7 Department of Labor regulation section 

8 2550.404c–5(e)(4)(i). 

9 ‘‘(C) BALANCED OPTION.—A class of as10 sets or funds that constitutes a qualified default 

11 investment alternative under Department of 

12 Labor regulation section 2550.404c–5(e)(4)(ii). 

13 ‘‘(6) COORDINATION WITH WITHHOLDING.— 

14 The Secretary shall modify the withholding exemp15 tion certificate under section 3402(f) so that, in the 

16 case of any qualifying employee covered under an 

17 automatic IRA arrangement, any notice and election 

18 requirements with respect to the arrangement may 

19 be met through the use of an attachment to such 

20 certificate or other modifications of the withholding 

21 exemption procedures. 

22 ‘‘(7) TREATMENT AS IRA.—An automatic IRA 

23 shall be treated for purposes of this title in the same 

24 manner as an individual retirement plan and may be 


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1 treated as a Roth IRA for purposes of this title if 

2 it meets the requirements of section 408A. 

3 ‘‘(8) EMPLOYER’S OPTION TO OBTAIN AFFIRMA4 TIVE ELECTIONS FROM EMPLOYEES INSTEAD OF

5 AUTOMATIC ENROLLMENT.—As an alternative to 

6 automatic enrollment, an employer may choose to 

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

8 employees that the employer wishes to obtain from 

9 each qualifying employee an affirmative election ei10 ther to contribute or not to contribute to an auto11 matic IRA, provided that any qualifying employee 

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

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

14 ‘‘(e) AUTOMATIC IRA CONTRIBUTIONS AND RETIRE15 MENT BOND PURCHASES TREATED LIKE OTHER CON16 TRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS.— 

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

18 that a contribution to an individual retirement plan 

19 or purchase of a retirement bond is made on behalf 

20 of an employee under an automatic IRA arrange21 ment instead of being made directly by the employee 

22 shall not affect the deductibility or other tax treat23 ment of the contribution or of other amounts under 

24 this title. 


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1 ‘‘(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN

2 INTO ACCOUNT.—Any contribution to an individual 

3 retirement plan or purchase of a retirement bond 

4 made on behalf of an employee under an automatic 

5 IRA arrangement shall be taken into account in ap6 plying the limitations on contributions to individual 

7 retirement plans and the other provisions of this 

8 title applicable to individual retirement plans as if 

9 the contribution or purchase had been made directly 

10 by the employee. 

11 ‘‘(f) DEPOSITS TO PLANS OF A DESIGNATED TRUST12 EE OR ISSUER AND FOR RETIREMENT BONDS.— 

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

14 treated as failing to satisfy the requirements of this 

15 section or any other provision of this title merely be16 cause the employer makes all contributions (or all 

17 contributions on behalf of employees who do not 

18 specify an individual retirement plan, trustee, or 

19 issuer to receive the contributions) to individual re20 tirement plans specified in paragraph (2) or to the 

21 Secretary or his agent for the purchase of retirement 

22 bonds specified in paragraph (3). 

23 ‘‘(2) INDIVIDUAL RETIREMENT PLANS OTHER

24 THAN THOSE SELECTED BY EMPLOYEE.—An em25 ployer may elect to have contributions for all qualiVerDate Mar 15 2010 23:49 Aug 11, 2010 Jkt 089200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H6099.IH H6099

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1 fying employees participating in an automatic IRA 

2 arrangement made to individual retirement plans of 

3 a trustee or issuer under the arrangement that has 

4 been designated by the employer. The preceding sen5 tence shall not apply unless each participant is noti6 fied in writing that the participant’s balance may be 

7 transferred without cost or penalty to another indi8 vidual retirement plan established by or on behalf of 

9 the participant. 

10 ‘‘(3) RETIREMENT BONDS.— 

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

12 provide that contributions deposited under sub13 paragraph (B) shall be applied to the purchase 

14 of a retirement bond in the name of each appli15 cable employee. 

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

17 Secretary shall establish procedures so that con18 tributions may be applied to the purchase of re19 tirement bonds without undue administrative or 

20 paperwork requirements on participating em21 ployers. Such procedures shall ensure that only 

22 1 such retirement bond of each type (traditional 

23 or Roth) is issued for each TIN. 


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

2 procedures the Secretary shall establish may include 

3 a procedure under which an employer— 

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

5 required to be deducted and withheld under 

6 chapter 24 the aggregate amounts, for the pe7 riod covered by the deposit, which qualifying 

8 employees have designated under subsection 

9 clause (i)(I) of subsection (d)(1)(B) (or are 

10 deemed to have designated under clause (ii) of 

11 such subsection) as contributions to purchase 

12 retirement bonds on behalf of the employees 

13 under paragraph (3), and 

14 ‘‘(B) specifies, in such manner as the Sec15 retary may prescribe, information needed to 

16 purchase retirement bonds on behalf of each ap17 plicable employee for whom a contribution is to 

18 be made, including— 

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

20 and 

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

22 ‘‘(5) PURPOSES.—The purposes of the retire23 ment bond program established under this sub24 section and subsection (g) include— 


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

2 low-cost investment option suitable for the ini3 tial accumulation of small automatic IRA con4 tributions, 

5 ‘‘(B) to reflect the intent that the long6 term investment of automatic IRA funds for 

7 most savers be in the private market rather 

8 than in retirement bonds, encouraging and as9 sisting individuals who accumulate larger 

10 amounts in retirement bonds to transfer those 

11 funds to individual retirement plans in the pri12 vate market, while 

13 ‘‘(C) permitting individuals to remain in14 vested in retirement bonds if they choose to do 

15 so. 

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

17 such regulations as are necessary to carry out the 

18 purposes of this subsection and subsection (g), in19 cluding— 

20 ‘‘(A) establishment of procedures to com21 municate to individuals the importance of in22 vestment diversification and the transfer option 

23 described in subparagraph (B), 

24 ‘‘(B) simplified procedures under which 

25 holders of retirement bonds may periodically 


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1 choose to have the bonds or their proceeds 

2 transferred to available individual retirement 

3 plans, and 

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

5 (or be treated as electing) whether to have re6 tirement bonds or their proceeds so transferred. 

7 Any such transfer shall be treated as a rollover con8 tribution for purposes of section 408(d)(3) (other 

9 than subparagraph (B) thereof). 

10 ‘‘(g) RETIREMENT BOND.— 

11 ‘‘(1) RETIREMENT BOND.—The term ‘retire12 ment bond’ means a bond issued under chapter 31 

13 of title 31, which by its terms, or by regulations pre14 scribed by the Secretary under such chapter— 

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

16 rates that take into account the expected dura17 tion of the funds invested in retirement bonds 

18 and at rates determined or adjusted in a man19 ner and with sufficient frequency to provide 

20 substantial protection from inflation, 

21 ‘‘(B) is not transferable, and 

22 ‘‘(C) is designed for investment for retire23 ment under automatic IRA arrangements or 

24 other savings vehicles. 


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1 ‘‘(2) INDIVIDUAL RETIREMENT PLAN RULES AP2 PLICABLE.—The provisions of this title applicable to 

3 an individual retirement plan (as defined in section 

4 7701(a)(37)), including provisions relating to con5 tributions, holding and distributions, shall apply to 

6 a retirement bond, except as determined by the Sec7 retary. 

8 ‘‘(3) ANNUAL STATEMENT.—As soon as prac9 ticable after the close of the calendar year, the Sec10 retary shall make available an annual statement to 

11 each participant setting forth— 

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

13 participant for the retirement bond, 

14 ‘‘(B) amounts earned by the retirement 

15 bond, 

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

17 close of such calendar year, 

18 ‘‘(D) the importance of diversifying retire19 ment savings, 

20 ‘‘(E) the benefits of a well-balanced and di21 versified investment portfolio, 

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

23 Department of Labor for sources of information 

24 on individual investing and diversification, 


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1 ‘‘(G) the procedures for redeeming a re2 tirement bond and directly transferring the re3 deemed amount into an individual retirement 

4 plan, 

5 ‘‘(H) other factors affecting retirement 

6 savings decisions, and 

7 ‘‘(I) such other information as the Sec8 retary determines necessary or appropriate. 

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

10 ‘‘(1) provide a model notice, written in a man11 ner calculated to be understandable to the average 

12 worker, that is simple for employers to use— 

13 ‘‘(A) to notify employees of the require14 ment under this section for the employer to pro15 vide certain employees with the opportunity to 

16 participate in an automatic IRA arrangement, 

17 and 

18 ‘‘(B) to satisfy the requirements of sub19 section (d)(2)(C), 

20 ‘‘(2) provide uniform forms for enrollment, in21 cluding automatic enrollment, in an automatic IRA 

22 arrangement, and 

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

24 means that small employers can access and use to 


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1 obtain information on automatic IRA arrangements 

2 and to obtain required notices and forms. 

3 The information referred to in paragraph (3) shall 

4 be provided in a manner designed to assist employ5 ers and providers by facilitating the identification by 

6 employers of private-sector providers of individual 

7 retirement plans and associated investment options 

8 that are appropriate for use in automatic IRA ar9 rangements. 

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

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

12 IRA Act of 2010.’’. 

13 (b) MANDATORY TRANSFERS.—Section 

14 401(a)(31)(B) of the Internal Revenue Code of 1986 is 

15 amended— 

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

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

18 each place it appears, and 

19 (2) by adding at the end the following new sen20 tence: ‘‘Any amount so transferred (and any earn21 ings thereon) shall be invested in a default invest22 ment described in section 408B(d)(5).’’. 

23 (c) PENALTY FOR FAILURE TIMELY TO REMIT CON24 TRIBUTIONS TO AUTOMATIC IRA ARRANGEMENTS.—Sec25 tion 4975(c) of the Internal Revenue Code of 1986 is 


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1 amended by adding at the end the following new para2 graph: 

3 ‘‘(7) SPECIAL RULE FOR AUTOMATIC IRA AR4 RANGEMENTS.—For purposes of paragraph (1), if 

5 an employer is required under an automatic IRA ar6 rangement under section 408B to deposit amounts 

7 withheld from an employee’s compensation into an 

8 automatic IRA or toward the purchase of a retire9 ment bond but fails to do so within the time pre10 scribed under section 408B(d)(2)(A), such amounts 

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

12 (d) COORDINATION WITH ERISA.— 

13 (1) EXEMPTION.— 

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

15 Employee Retirement Income Security Act of 

16 1974 (29 U.S.C. 1002(2)) is amended— 

17 (i) by inserting ‘‘or (C)’’ after ‘‘sub18 paragraph (B)’’ in subparagraph (A), and 

19 (ii) by adding at the end the following 

20 new subparagraph: 

21 ‘‘(C) An automatic IRA arrangement de22 scribed in section 408B(d) of the Internal Rev23 enue Code of 1986 shall not be treated as an 

24 employee pension benefit plan or pension plan 

25 if, under the arrangement, contributions are to 


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1 be made to an automatic IRA the provider of 

2 which is included in the website list established 

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

4 be made to an individual retirement plan des5 ignated by the employee, or are to be made to 

6 the Secretary of the Treasury for investment in 

7 retirement bonds.’’. 

8 (B) CUSTOMER IDENTIFICATION PRO9 GRAM.—Notwithstanding the amendment made 

10 by subparagraph (A), an individual retirement 

11 plan established pursuant to an automatic IRA 

12 arrangement described in section 408B(d) of 

13 the Internal Revenue Code of 1986 shall, for 

14 purposes of any customer identification pro15 gram established under section 5318(l) of title 

16 31, United States Code, be treated as an ac17 count opened for the purpose of participating in 

18 an employee benefit plan established under the 

19 Employee Retirement Income Security Act of 

20 1974. 

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

22 such Act is amended— 

23 (A) by inserting the following sentence be24 fore the last sentence: ‘‘In the case of an auto25 matic IRA under section 408B of such Code 


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1 that is not exempt under section 3(2)(C), a par2 ticipant or beneficiary shall, for purposes of 

3 paragraph (1), be treated as exercising control 

4 over the assets in the account on and after the 

5 7th day after notice has been given to an em6 ployee that such automatic IRA has been estab7 lished on behalf of the employee.’’, and 

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

9 automatic IRA under section 408B of such 

10 Code’’ after ‘‘arrangement’’ in the last sen11 tence. 

12 (e) NOTICE OF AVAILABILITY OF INVESTMENT

13 GUIDELINES.— 

14 (1) IN GENERAL.—Section 408(i) of the Inter15 nal Revenue Code of 1986 (relating to reports) is 

16 amended by adding at the end the following new 

17 sentences: ‘‘Any report furnished under paragraph 

18 (2) to an individual shall include notice of the inter19 net website of the Department of Labor for sources 

20 of information on individual investing and diver21 sification.’’. 

22 (2) UPDATE INFORMATION.—Such information 

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

24 Labor in consultation with the Secretary of the 

25 Treasury and the Chairman of the Securities and 


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1 Exchange Commission to address needed changes 

2 due to the creation of automatic IRAs. 

3 (f) FAILURE TO PROVIDE ACCESS TO PAYROLL SAV4 INGS ARRANGEMENTS.—Chapter 43 of the Internal Rev5 enue Code of 1986 (relating to qualified pension, etc., 

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

7 section: 

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

9 TO PROVIDE EMPLOYEES ACCESS TO AUTO10 MATIC IRA ARRANGEMENTS. 

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

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

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

14 for a calendar year. 

15 ‘‘(b) AMOUNT.— 

16 ‘‘(1) IN GENERAL.—The amount of the tax im17 posed by subsection (a) on any failure for any cal18 endar year shall be $100 with respect to each em19 ployee to whom such failure relates. 

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

21 DISCOVERED AND REASONABLE DILIGENCE EXER22 CISED.—No tax shall be imposed by subsection (a) 

23 on any failure during any period for which it is es24 tablished to the satisfaction of the Secretary that the 

25 employer subject to liability for the tax did not know 


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1 that the failure existed and exercised reasonable dili2 gence to meet the requirements of subsection (d). 

3 ‘‘(3) TAX NOT TO APPLY TO FAILURES COR4 RECTED WITHIN 90 DAYS.—No tax shall be imposed 

5 by subsection (a) on any failure if— 

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

7 the tax under subsection (a) exercised reason8 able diligence to meet the requirements of sub9 section (d), and 

10 ‘‘(B) the employer provides the automatic 

11 IRA arrangement described in section 408B to 

12 each employee eligible to participate in the ar13 rangement by the end of the 90-day period be14 ginning on the first date the employer knew, or 

15 exercising reasonable diligence would have 

16 known, that such failure existed. 

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

18 failure which is due to reasonable cause and not to 

19 willful neglect, the Secretary may waive part or all 

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

21 that the payment of such tax would be excessive or 

22 otherwise inequitable relative to the failure involved. 

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

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1 quirements of subsection (d). The Secretary, in the Sec2 retary’s discretion, may prescribe that the confirmation 

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

4 may use for this purpose the annual report or quarterly 

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

6 Secretary may deem advisable. 

7 ‘‘(d) REQUIREMENT TO PROVIDE EMPLOYEE ACCESS

8 TO AUTOMATIC IRA ARRANGEMENTS.—The requirements 

9 of this subsection are met if the employer meets the re10 quirements of section 408B.’’. 

11 (g) WAIVER OF EARLY WITHDRAWAL PENALTY FOR

12 CERTAIN DISTRIBUTIONS FOLLOWING INITIAL ELECTION

13 TO PARTICIPATE IN AUTOMATIC IRA ARRANGEMENT.— 

14 Subsection (t) of section 72 of such Code is amended by 

15 adding at the end the following new paragraph: 

16 ‘‘(11) DISTRIBUTION FOLLOWING INITIAL

17 ELECTION TO PARTICIPATE IN AUTOMATIC IRA AR18 RANGEMENT.—Paragraph (1) shall not apply in the 

19 case of a distribution to a qualifying employee made 

20 not later than 90 days after the initial election 

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

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

23 States Code, is amended— 

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

25 after ‘‘408A,’’, and 


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

2 automatic IRA arrangement described in section 

3 408B,’’. 

4 (i) AUTOMATIC IRA ADVISORY GROUP.— 

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

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

7 the Treasury and the Secretary of Labor shall joint8 ly establish an Automatic IRA Advisory Group (in 

9 this subsection referred to as the ‘‘Advisory 

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

11 be to make recommendations regarding the auto12 matic IRA investment options described in section 

13 408B(d)(5) of the Internal Revenue Code of 1986 

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

15 such Code, including, with respect to automatic IRA 

16 arrangements, the disclosure of information regard17 ing fees and expenses, the use of low-cost investment 

18 options, the appropriate use of electronic methods to 

19 provide notice and disclosure, and such other related 

20 matters as may be determined by the Secretaries. 

21 (2) MEMBERSHIP.—The Advisory Group shall 

22 consist of not more than 15 members and shall be 

23 composed of— 

24 (A) such persons as the Secretaries of the 

25 Treasury and Labor may consider appropriate 


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1 to provide expertise regarding investments for 

2 retirement, including providers of individual re3 tirement accounts and individual retirement an4 nuities described in section 408 or 408A of 

5 such Code, and 

6 (B) one or more representatives of the De7 partment of Labor and of the Department of 

8 the Treasury. 

9 (3) COMPENSATION.—The members of the Ad10 visory Group shall serve without compensation. 

11 (4) ADMINISTRATIVE SUPPORT.—The Depart12 ment of the Treasury and the Department of Labor 

13 shall jointly provide appropriate administrative sup14 port to the Advisory Group, including technical as15 sistance. The Advisory Group may use the services 

16 and facilities of such Departments, with or without 

17 reimbursement, as jointly determined by such De18 partments. 

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

20 than 12 months after the date of the enactment of 

21 this Act, the Advisory Group shall submit to the 

22 Secretary of Labor and the Secretary of the Treas23 ury a report containing its recommendations. The 

24 Secretaries may request that the Advisory Group 

25 submit subsequent reports. 


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1 (j) CONFORMING AMENDMENTS.— 

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

3 I of subchapter A of chapter 1 of the Internal Rev4 enue Code of 1986 is amended by inserting after the 

5 item relating to section 408A the following new 

6 item: 

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

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

8 Code is amended by adding at the end the following 

9 new item: 

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

10 (k) PREEMPTION OF CONFLICTING STATE LAWS.— 

11 The amendments made by this section shall supersede any 

12 law of a State that would directly or indirectly prohibit 

13 or restrict the establishment or operation of an automatic 

14 IRA arrangement meeting the requirements of section 

15 408B of the Internal Revenue Code of 1986. Nothing in 

16 such amendments shall be construed to impair or super17 sede any State law to the extent it provides a remedy for 

18 the failure to make payroll deposit payments under any 

19 such automatic IRA arrangement within the period re20 quired under such section 408B. 

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

22 this section shall apply to calendar years beginning after 

23 December 31, 2011. 


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1 SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING 

2 AUTOMATIC IRA ARRANGEMENTS. 

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 (relating to business related credits) is amended by 

6 adding at the end the following new section: 

7 ‘‘SEC. 45S. SMALL EMPLOYER AUTOMATIC IRA ARRANGE8 MENT. 

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

10 in the case of an eligible employer maintaining an auto11 matic IRA arrangement meeting the requirements of sec12 tion 408B (without regard to whether the employer is re13 quired to maintain the arrangement), the small employer 

14 automatic IRA arrangement credit determined under this 

15 section for any taxable year is the amount determined 

16 under subsection (b). 

17 ‘‘(b) AMOUNT OF CREDIT.— 

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

19 determined under this section for any taxable year 

20 with respect to an eligible employer shall be equal to 

21 the lesser of— 

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

23 qualifying employees (within the meaning of 

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

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1 ferred to in subsection (a) for the calendar year 

2 in which the taxable year begins, or 

3 ‘‘(B) $250. 

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

5 determined under this section for any taxable year 

6 other than a taxable year which begins in the first 

7 2 calendar years in which the eligible employer 

8 maintains an automatic IRA arrangement meeting 

9 the requirements of section 408B. 

10 ‘‘(3) COORDINATION WITH SMALL EMPLOYER

11 STARTUP CREDIT.—No credit shall be allowed under 

12 this section to the employer for any taxable year if 

13 a credit is determined under section 45E with re14 spect to the employer for the taxable year. 

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

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

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

18 employer which— 

19 ‘‘(1) maintains an automatic IRA arrangement 

20 meeting the requirements of section 408B, 

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

22 year, had no more than 100 employees, and 

23 ‘‘(3) did not maintain a qualifying plan or ar24 rangement (described in section 408B(b)) during the 

25 portion of the calendar year preceding the adoption 


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1 of the automatic IRA arrangement and the 2 pre2 ceding calendar years. 

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

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

5 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI6 NESS CREDIT.—Section 38(b) of the Internal Revenue 

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

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

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

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

11 new paragraph: 

12 ‘‘(37) in the case of an eligible employer (as de13 fined in section 45S(c)) maintaining an automatic 

14 IRA arrangement meeting the requirements of sec15 tion 408B, the small employer automatic IRA ar16 rangement credit determined under section 45S(a).’’. 

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

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

19 of the Internal Revenue Code of 1986 is amended by add20 ing at the end the following new item: 

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

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2011. 


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1 SEC. 4. PROMOTING QUALIFIED PLANS. 

2 (a) INCREASE IN CREDIT FOR SMALL EMPLOYER

3 PENSION PLAN STARTUP COSTS.— 

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

6 ‘‘$500’’ and inserting ‘‘$1,000’’. 

7 (2) EFFECTIVE DATE.—The amendment made 

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

10 (b) ELIMINATING BARRIERS TO USE OF MULTIPLE

11 EMPLOYER PLANS.—The Secretaries of the Treasury and 

12 Labor shall— 

13 (1) prescribe administrative guidance estab14 lishing conditions under which an employer partici15 pating in a plan described in section 413(c) of the 

16 Internal Revenue Code of 1986 shall not have any 

17 liability under title I of the Employee Retirement In18 come Security Act of 1974 with respect to the acts 

19 or omissions of one or more other participating em20 ployers, which regulations may require that the por21 tion of the plan attributable to such participating 

22 employers be spun off to plans maintained by such 

23 employers, 

24 (2) prescribe administrative guidance estab25 lishing conditions under which a plan described in 

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1 fying the qualification requirements of sections 

2 401(a) and 413(c) of such Code despite the violation 

3 of such requirements by one or more participating 

4 employers, including requiring, if appropriate, that 

5 the portion of the plan attributable to such partici6 pating employers be spun off to plans maintained by 

7 such employers, and 

8 (3) prescribe administrative guidance providing 

9 simplified means, including model plan language, by 

10 which plans described in section 413(c) of such Code 

11 may satisfy the requirements of sections 102, 103, 

12 and 105 of the Employee Retirement Income Secu13 rity Act of 1974. 

14 SEC. 5. STUDIES. 

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

16 and the Secretary of Labor shall jointly conduct a separate 

17 study of the feasibility and desirability of each of the fol18 lowing: 

19 (1) Extending to automatic IRA arrangements 

20 spousal consent requirements similar to, or based 

21 on, those that apply under the Federal Employees’ 

22 Thrift Savings Plan, including consideration of 

23 whether modifications of such requirements are nec24 essary to apply them to automatic IRA arrange25 ments. 


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

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

4 including consideration of— 

5 (A) appropriate means of arranging for, or 

6 encouraging, individuals to receive at least a 

7 portion of their distributions in some form of 

8 low-cost guaranteed lifetime income, and 

9 (B) issues presented by possible additional 

10 differences in, or uniformity of, provisions gov11 erning different individual retirement arrange12 ments. 

13 (3) Establishing procedures under which 

14 amounts saved by employees in retirement bonds 

15 would be automatically transferred into alternative 

16 diversified investments provided by the private sector 

17 when employees’ automatic IRA balances reach a 

18 certain dollar level. 

19 (b) STUDY OF CONSOLIDATION OF INDIVIDUAL RE20 TIREMENT PLANS.—The Secretary of the Treasury and 

21 the Secretary of Labor shall jointly conduct a separate 

22 study of the feasibility and desirability of— 

23 (1) using data submitted on investments in in24 dividual retirement accounts and annuities to enable 

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1 ities that include very small amounts to receive peri2 odic notices informing them about the location of 

3 these accounts and how such accounts and annuities 

4 might be consolidated, and 

5 (2) using investment arrangements associated 

6 with automatic IRAs to assist in addressing the 

7 problem of abandoned accounts. 

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

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

10 report the results of each study conducted under this sec11 tion, together with any recommendations for legislative 

12 changes, to the Committees on Finance and Health, Edu13 cation, Labor, and Pensions of the Senate and the Com14 mittees on Ways and Means and Education and Labor of 

15 the House of Representatives. 

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

17 this section shall apply to calendar years beginning on or 

18 after the date of the enactment of this Act. 

Æ 


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