I 

110TH CONGRESS 

2D SESSION H. R. 5160 

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 

JANUARY 29, 2008 

Mr. KIND (for himself and Mr. HULSHOF) 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 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. 

4 This Act may be cited as the ‘‘Small Businesses Add 

5 Value for Employees Act of 2008’’ or the ‘‘SAVE Act of 

6 2008’’. 


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1 SEC. 2. ELIMINATION OF RESTRICTION ON SIMPLE IRA 

2 ROLLOVERS. 

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

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

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

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

7 this section shall apply to distributions in taxable years 

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

9 SEC. 3. ALLOWING MID-YEAR SIMPLE IRA PLAN TERMI10 NATION. 

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

12 the Internal Revenue Code of 1986 is amended by adding 

13 at the end the following new paragraph: 

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

15 TERMINATION.— 

16 ‘‘(A) IN GENERAL.—An employer may 

17 elect to terminate (in such form and manner as 

18 the Secretary may provide) the qualified salary 

19 reduction arrangement of the employer at any 

20 time during the year. 

21 ‘‘(B) PRORATION AND APPLICATION OF

22 QUALIFIED PLAN LIMITATION.—In the case of a 

23 year during which an employer terminates a 

24 qualified salary reduction arrangement before 

25 the end of such year— 


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1 ‘‘(i) the applicable dollar amount in 

2 effect for such year shall be prorated to 

3 the date of such termination, 

4 ‘‘(ii) for purposes of determining the 

5 compensation of an employee for such ar6 rangement for such year, the year of such 

7 termination shall be treated as ending on 

8 the date of such termination, and 

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

10 (2) shall not apply with respect to a quali11 fied plan maintained in such year only 

12 after the date of such termination.’’. 

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

14 this section shall apply to years beginning after the date 

15 of the enactment of this Act. 

16 SEC. 4. ELIMINATION OF HIGHER PENALTY ON EARLY SIM17 PLE IRA DISTRIBUTIONS. 

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

19 Internal Revenue Code of 1986 (relating to 10 percent ad20 ditional tax on early distributions from qualified retire21 ment plans) is amended by striking paragraph (6). 

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

23 this section shall apply to distributions in taxable years 

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


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1 SEC. 5. INCREASE IN CONTRIBUTIONS ALLOWED FOR SIM2 PLE IRA. 

3 (a) ADDITIONAL NONELECTIVE EMPLOYER CON4 TRIBUTIONS ALLOWED.— 

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

6 408(p)(2) of the Internal Revenue Code of 1986 (re7 lating to qualified salary reduction arrangement) is 

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

9 by redesignating clause (iv) as clause (v), and by in10 serting after clause (iii) the following new clause: 

11 ‘‘(iv) the employer may make, in addi12 tion to any other contribution under this 

13 paragraph, nonelective contributions of not 

14 more than 10 percent of compensation 

15 (subject to the limitation described in sub16 paragraph (B)(ii)) for each employee who 

17 is eligible to participate in the arrangement 

18 and who has at least $5,000 of compensa19 tion from the employer for the year, and’’. 

20 (2) CONFORMING AMENDMENT.—Clause (v) of 

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

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

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

24 (b) INCREASE IN ELECTIVE CONTRIBUTION LIMITA25 TION.—Subparagraph (E) of section 408(p)(2) is amend26 ed to read as follows: 


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

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

3 dollar amount shall be the applicable dollar 

4 amount in effect under subparagraph (B) of 

5 section 402(g)(1).’’. 

6 (c) SIMPLE IRA SUBJECT TO DEFINED CONTRIBU7 TION PLAN LIMITATION.—Subsection (p) of section 408 

8 of such Code is amended by adding at the end the fol9 lowing new paragraph: 

10 ‘‘(11) SUBJECT TO DEFINED CONTRIBUTION

11 PLAN LIMITATION.—An arrangement shall not be 

12 treated as a qualified salary reduction arrangement 

13 for any year if contributions with respect to any em14 ployee for the year exceed the limitation of para15 graph (1) of section 415(c) (relating to limitation for 

16 defined contribution plans).’’. 

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

18 this section shall apply to contributions for taxable years 

19 beginning after December 31, 2007. 

20 SEC. 6. SIMPLE 401(k) PARITY FOR ADDITIONAL NONELEC21 TIVE EMPLOYER CONTRIBUTIONS. 

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

23 401(k)(11) of such Code (relating to contribution require24 ments) is amended by adding at the end the following new 

25 clause: 


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1 ‘‘(iv) SPECIAL RULE FOR ADDITIONAL

2 NONELECTIVE EMPLOYER CONTRIBU3 TIONS.—An arrangement shall not be 

4 treated as failing to meet the requirements 

5 of this subparagraph merely because under 

6 such arrangement the employer makes, in 

7 addition to any other contribution under 

8 this subparagraph, nonelective contribu9 tions of not more than 10 percent of com10 pensation for each employee who is eligible 

11 to participate in the arrangement and who 

12 has at least $5,000 of compensation from 

13 the employer for the year.’’. 

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

15 this section shall apply to plan years beginning after De16 cember 31, 2007. 

17 SEC. 7. AUTOMATIC DEFERRAL IRAS. 

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

19 D of chapter 1 of the Internal Revenue Code of 1986 (re20 lating to pension, profit-sharing, stock bonus plans, etc.) 

21 is amended by inserting after section 408A the following 

22 new section: 

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

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

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


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1 as an individual retirement plan. An automatic IRA may 

2 also be treated as a Roth IRA for purposes of this title 

3 if it meets the requirements of section 408A. 

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

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

6 individual retirement plan (as defined in section 

7 7701(a)(37)) with respect to which contributions are made 

8 under an arrangement which satisfies the requirements of 

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

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

11 ‘‘(1) ENROLLMENT.— 

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

13 this paragraph are met if each employee eligible 

14 to participate in the arrangement is treated as 

15 having elected to have the employer make pay16 ments as elective contributions to an automatic 

17 deferral IRA on behalf of such employee (which 

18 would have otherwise been made to the em19 ployee directly in cash) in an amount equal to 

20 so much of a qualified percentage of compensa21 tion of such employee as does not exceed the 

22 deductible amount for such year (within the 

23 meaning of section 219(b)). 

24 ‘‘(B) ELIGIBILITY.—An employee is eligi25 ble to participate if such employee is described 


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1 in paragraph (2) of section 408(k), except that 

2 for purposes of determining whether an em3 ployee is described in such paragraph, subpara4 graph (C) thereof shall be applied by sub5 stituting ‘$5,000’ for ‘$450’. 

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 trust 

21 agreement if such percentage is applied uni22 formly, is at least 3 percent, and does not ex23 ceed 10 percent. 

24 ‘‘(2) NOTICE.— 


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

2 this paragraph are met if, within a reasonable 

3 period before the first day an employee is eligi4 ble to participate in the arrangement, the em5 ployee receives written notice of the employee’s 

6 rights and obligations under the arrangement 

7 which— 

8 ‘‘(i) is sufficiently accurate and com9 prehensive to apprise the employee of such 

10 rights, and 

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

12 to be understood by the average employee 

13 to whom the arrangement applies. 

14 ‘‘(B) TIMING AND CONTENT.—A notice 

15 shall not be treated as meeting the require16 ments of subparagraph (A) with respect to an 

17 employee unless— 

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

19 right to elect not to have elective contribu20 tions made on the employee’s behalf (or to 

21 elect to have such contributions made at a 

22 different percentage), 

23 ‘‘(ii) the notice explains how contribu24 tions made under the arrangement will be 


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1 invested in the absence of any investment 

2 election by the employee, and 

3 ‘‘(iii) the employee has a reasonable 

4 period of time after receipt of the notice 

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

6 the first elective contribution is made to 

7 make either such election. 

8 ‘‘(3) DEFAULT INVESTMENT ARRANGEMENT.— 

9 The requirements of this paragraph are met if— 

10 ‘‘(A) in the absence of an investment elec11 tion by the employee with respect to the em12 ployee’s interest in the trust, such interest is in13 vested as provided in regulations prescribed 

14 pursuant to subparagraph (A) of section 

15 404(c)(5) of the Employee Retirement Income 

16 Security Act of 1974, and 

17 ‘‘(B) the employer provides each employee 

18 who has an interest in the trust, notice which 

19 meets the requirements of subparagraph (B) of 

20 such section. 

21 ‘‘(4) ADMINISTRATIVE REQUIREMENTS.—The 

22 requirements of this paragraph are met if— 

23 ‘‘(A) an employer must make the elective 

24 employer contributions under paragraph (1)(A) 

25 not later than the close of the 30-day period 


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1 following the last day of the month with respect 

2 to which the contributions are to be made, 

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

4 participation in the arrangement at any time 

5 during the year, except that if the employee so 

6 terminates, the arrangement may provide that 

7 the employee may elect to resume participation 

8 until the beginning of the next year, and 

9 ‘‘(C) each employee eligible to participate 

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

11 beginning of any year, or to modify the amount 

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

13 (b) PREEMPTION OF CONFLICTING STATE LAWS.— 

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

15 or indirectly prohibit or restrict an employer from creating 

16 or organizing an automatic deferral IRA (as defined in 

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

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

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

20 the Internal Revenue Code of 1986 is amended by insert21 ing after the item relating to 408A the following new item: 

‘‘408B. Automatic deferral IRAs.’’. 

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

23 this section shall apply to taxable years beginning after 

24 December 31, 2007. 


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1 SEC. 8. EXPANDING SMALL EMPLOYER PENSION PLAN 

2 STARTUP COST CREDIT. 

3 (a) IN GENERAL.— 

4 (1) INCLUDING STARTUP COSTS FOR EM5 PLOYER-ESTABLISHED IRAS.—Paragraph (2) of sec6 tion 45E(d) of the Internal Revenue Code of 1986 

7 (defining eligible employer plan) is amended by in8 serting before the period ‘‘and a plan of which a 

9 trust described in section 408(c) is a part’’. 

10 (2) ADDITIONAL CREDIT AMOUNT.— 

11 (A) IN GENERAL.—Subsection (a) of sec12 tion 45E of such Code is amended by striking 

13 ‘‘50 percent of’’ and all that follows and insert14 ing ‘‘the sum of— 

15 ‘‘(1) 50 percent of the qualified startup costs 

16 paid or incurred by the taxpayer during the taxable 

17 year, plus 

18 ‘‘(2) $25 multiplied by the number of employees 

19 of the employer who participate in any eligible em20 ployer plan of the employer for the first time in such 

21 taxable year.’’. 

22 (B) CONFORMING AMENDMENT.—Para23 graph (2) of section 45E(c) of such Code (de24 fining eligible employer) is amended— 


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1 (i) by striking ‘‘qualified employer 

2 plan’’ in each place it appears and insert3 ing ‘‘eligible employer plan’’, and 

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

5 heading thereof and inserting ‘‘ELIGIBLE’’. 

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. 9. AMENDMENT TO EMPLOYEE RETIREMENT INCOME 

11 SECURITY ACT OF 1974. 

12 (a) IN GENERAL.—Section 3(2) of the Employee Re13 tirement Income Security Act of 1974 (29 U.S.C. 

14 1002(2)) is amended by adding at the end the following 

15 new subparagraph: 

16 ‘‘(C) An individual retirement plan (as defined in sec17 tion 7701(a)(37) of the Internal Revenue Code of 1986) 

18 shall not be considered a pension plan merely because an 

19 employer establishes a payroll deduction program for the 

20 purpose of enabling employees to make voluntary con21 tributions to such account or annuity.’’. 

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

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

24 of this Act. 

Æ 


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