II 

116TH CONGRESS 

1ST SESSION S. 2370 

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

and retirement savings coverage by enabling employees not covered by 

qualifying retirement plans to save for retirement through automatic 

IRA arrangements, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 31, 2019 

Mr. WHITEHOUSE introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to expand 

personal saving and retirement savings coverage by enabling employees not covered by qualifying retirement 

plans to save for retirement through automatic IRA arrangements, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; REFERENCE. 

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

5 ‘‘Automatic IRA Act of 2019’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amendVerDate Sep 11 2014 03:16 Aug 08, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2370.IS S2370

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1 ment or repeal is expressed in terms of an amendment 

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

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

5 SEC. 2. QUALIFYING AUTOMATIC IRA ARRANGEMENTS. 

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

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

8 amended by inserting after section 408A the following new 

9 section: 

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

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

12 qualifying automatic IRA arrangement is an automatic 

13 IRA arrangement which is offered by a covered employer 

14 to each qualifying employee of the employer. 

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

16 section— 

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

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

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

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

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

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


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

2 of the first day of the preceding calendar year, 

3 or 

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

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

7 plan sponsor— 

8 ‘‘(i) no employer contribution has 

9 been made to the plan or arrangement for 

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

11 plan year ending in the preceding calendar 

12 year, and 

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

14 that an employer contribution will be made 

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

17 ‘‘(3) EXCEPTION FOR CERTAIN SMALL AND

18 NEW EMPLOYERS.— 

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

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

24 compensation (as defined in section 


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

3 ‘‘(ii) did not normally employ more 

4 than 10 employees on a typical business 

5 day of the preceding calendar year, or 

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

7 during the calendar year and the preceding 

8 calendar year. 

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

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

12 ‘‘(i) rules consistent with any rules 

13 applicable in determining the number of 

14 employees for purposes of section 

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

16 apply, 

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

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

19 shall be treated as 1 individual, and 

20 ‘‘(iii) any reference to an employer 

21 shall include a reference to any predecessor 

22 employer. 

23 ‘‘(4) EXCEPTION FOR GOVERNMENTS AND

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

25 include— 


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

2 section 414(d), or 

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

5 under section 501. 

6 ‘‘(5) COORDINATION WITH QUALIFYING STATE7 FACILITATED AUTOMATIC IRA PROGRAMS.— 

8 ‘‘(A) IN GENERAL.—In the case of an em9 ployer all of the employees of which are em10 ployed in a single State, if such State maintains 

11 or facilitates a qualifying State-facilitated auto12 matic IRA program, any employer which is re13 quired to participate in such State program is 

14 not a covered employer for purposes of this sec15 tion. 

16 ‘‘(B) EMPLOYERS WITH EMPLOYEES IN

17 MULTIPLE STATES.—In the case of an employer 

18 which employs employees in more than 1 

19 State— 

20 ‘‘(i) if each such State maintains or 

21 facilitates a qualifying State-facilitated 

22 automatic IRA program, the employer par23 ticipation rules of each such program (and 

24 of subparagraph (A)) apply, respectively, 

25 to employees employed in such State, and 


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1 ‘‘(ii) if one or more of such States, 

2 but not all, maintain or facilitate a quali3 fying State-facilitated automatic IRA pro4 gram— 

5 ‘‘(I) the employer participation 

6 rules of each such program (and of 

7 subparagraph (A)) apply, respectively, 

8 to employees employed in such State, 

9 and 

10 ‘‘(II) the employer is a covered 

11 employer for purposes of this section 

12 with respect to qualifying employees 

13 employed in States which do not 

14 maintain or facilitate such a program 

15 (unless otherwise excluded under 

16 paragraph (3)(A)), 

17 unless the employer makes an irrevocable 

18 election to be treated as a covered em19 ployer for purposes of this section with re20 spect to all qualifying employees in all 

21 States. 

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

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

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

25 shall be treated as a single employer. 


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

2 section— 

3 ‘‘(1) IN GENERAL.—The term ‘qualifying em4 ployee’ means any employee of the employer other 

5 than— 

6 ‘‘(A) an excluded employee, and 

7 ‘‘(B) an employee who participates in (or 

8 is eligible to, and has elected not to, participate 

9 in) a qualifying State-facilitated automatic IRA. 

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

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

12 qualifying plans or arrangements described in 

13 section 219(g)(5), 

14 ‘‘(B) the employees of any subsidiary, divi15 sion, or other major business unit of the em16 ployer are generally not eligible to participate in 

17 any such qualifying plan or arrangement, and 

18 ‘‘(C) the number of employees of the em19 ployer described in subparagraph (B) for a cal20 endar year is— 

21 ‘‘(i) at least 50, and 

22 ‘‘(ii) at least 10 percent of the em23 ployees of the employer (other than exclud24 able employees), 


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

2 be treated as a covered employer with respect to 

3 such employees (other than excluded employees) for 

4 the calendar year, and such employees (other than 

5 excluded employees) shall be treated as qualifying 

6 employees. 

7 ‘‘(3) EXCLUDED EMPLOYEES.— 

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

9 employee’ means an employee of the employer 

10 who is an excludable employee and who is in a 

11 class or category that the employer elects to ex12 clude from treatment as qualifying employees. 

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

14 ‘excludable employee’ means— 

15 ‘‘(i) any employee described in section 

16 410(b)(3), 

17 ‘‘(ii) any employee who has not at18 tained the age of 18 before the first day of 

19 the calendar year, 

20 ‘‘(iii) any employee who has not com21 pleted at least 3 months of service with the 

22 employer, 

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

24 maintains a qualifying plan or arrange25 ment which excludes employees who have 


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1 not satisfied the minimum age and service 

2 requirements for participation in the plan, 

3 any employee who has not satisfied such 

4 requirements, 

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

6 maintains a section 403(b) annuity con7 tract (including a custodial account or re8 tirement income account), any employee 

9 who is permitted to be excluded from any 

10 salary reduction arrangement under the 

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

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

13 maintains an arrangement described in 

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

15 required to be eligible to participate in the 

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

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

18 maintains a simplified employee pension 

19 described in section 408(k), any employee 

20 who is permitted to be excluded from par21 ticipation under section 408(k)(2). 

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

23 regulations or other guidance to carry out this sub24 section, including— 


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1 ‘‘(A) guidelines for determining the classes 

2 or categories of employees to be covered by an 

3 automatic IRA arrangement, 

4 ‘‘(B) if an employer excludes employees 

5 from the automatic IRA arrangement, guide6 lines providing that the employer shall specify 

7 the classification or categories of employees who 

8 are so excluded, and 

9 ‘‘(C) rules to prevent avoidance of the re10 quirements of this section. 

11 ‘‘(d) AUTOMATIC IRA ARRANGEMENT.—For pur12 poses of this section— 

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

14 arrangement’ means an arrangement of an employer 

15 (determined without regard to whether the employer 

16 is required to maintain the arrangement)— 

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

18 ‘‘(i) may elect— 

19 ‘‘(I) to contribute to an indi20 vidual retirement plan, or to purchase 

21 a qualifying retirement bond, by hav22 ing the employer deposit payroll de23 duction amounts or make other peri24 odic direct deposits (including elec25 tronic payments) to the plan or invest 


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1 such amounts in such qualifying re2 tirement bonds, 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)(I) in the amount 

7 specified in paragraph (5) 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 ‘‘(B) which meets the administrative re17 quirements of paragraph (3), including the no18 tice requirement of paragraph (3)(C), and 

19 ‘‘(C) which does not charge unreasonable 

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

22 ‘‘(2) EMPLOYER’S OPTION TO OBTAIN AFFIRMA23 TIVE ELECTIONS FROM EMPLOYEES INSTEAD OF

24 AUTOMATIC ENROLLMENT.—As an alternative to 

25 automatic enrollment, an employer may choose to 


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1 comply with paragraph (1)(A)(ii) by notifying em2 ployees that the employer wishes to obtain from each 

3 qualifying employee an affirmative election either to 

4 contribute or not to contribute to an automatic IRA, 

5 provided that any qualifying employee who fails to 

6 make such an election is treated in the manner pro7 vided under paragraph (1)(A)(ii). 

8 ‘‘(3) ADMINISTRATIVE REQUIREMENTS.— 

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

10 this paragraph are met with respect to any 

11 automatic IRA arrangement if the employer 

12 makes the payments elected or treated as elect13 ed under paragraph (1)(A)— 

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

15 month following the month in which the 

16 compensation otherwise would have been 

17 payable to the employee in cash, 

18 ‘‘(ii) before such later deadline pre19 scribed by the Secretary for making such 

20 payments, but not later than the due date 

21 for the deposit of tax required to be de22 ducted and withheld under chapter 24 (re23 lating to collection of income tax at source 

24 on wages) for the payroll period to which 

25 such payments relate, or 


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1 ‘‘(iii) as early as administratively 

2 practicable. 

3 ‘‘(B) TERMINATION OF EMPLOYEE PAR4 TICIPATION.—Subject to a requirement for rea5 sonable notice, an employee may elect to termi6 nate participation in the arrangement at any 

7 time during a calendar year, except that if an 

8 employee so terminates, the arrangement may 

9 provide that the employee may not elect to re10 sume participation until the beginning of the 

11 next calendar year. 

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

13 requirements of this paragraph shall not be 

14 treated as met with respect to any year unless 

15 the employer notifies each employee eligible to 

16 participate, within a reasonable period of time 

17 before the 30th day before the beginning of 

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

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

20 such employee is so eligible), of— 

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

22 or treated as elected under paragraph 

23 (1)(A), 


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1 ‘‘(ii) the opportunity to make the elec2 tion to terminate participation in the ar3 rangement under subparagraph (B), 

4 ‘‘(iii) the opportunity to make the 

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

6 contributions or purchases made at a dif7 ferent percentage or in a different amount, 

8 and 

9 ‘‘(iv) the opportunity under paragraph 

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

11 such amounts are invested for such year. 

12 ‘‘(D) INVESTMENT OPTIONS.—The require13 ments of this paragraph shall not be treated as 

14 met with respect to any year unless an em15 ployee electing to have contributions made to an 

16 individual retirement plan is provided with the 

17 option to choose among all investment options 

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

19 (E) of paragraph (6). 

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

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

22 having made an election to participate in an auto23 matic IRA arrangement— 

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

25 made an election to make contributions and 


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1 payments in the amount determined under such 

2 clause, and 

3 ‘‘(B) such contributions shall— 

4 ‘‘(i) be transferred to an individual re5 tirement plan of the designated trustee or 

6 issuer, but only if the contributions are in7 vested as provided in paragraph (6), or 

8 ‘‘(ii) be applied toward the purchase 

9 of a qualifying retirement bond. 

10 ‘‘(5) AMOUNT OF CONTRIBUTIONS AND PAY11 MENTS.— 

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

13 in this paragraph with respect to any employee 

14 is— 

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

16 the employee, or 

17 ‘‘(ii) such other percentage of com18 pensation as is specified in regulations pre19 scribed by the Secretary which is not less 

20 than 2 percent or more than 6 percent. 

21 ‘‘(B) AUTHORITY TO PROVIDE FOR PERI22 ODIC INCREASES.—In the case of qualifying em23 ployees under an automatic IRA arrangement 

24 for 2 or more consecutive years, the Secretary 

25 may by regulation provide for periodic (not 


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1 more frequent than annual) increases in the 

2 percentage of compensation an employee is 

3 deemed to have elected under subparagraph 

4 (A). The considerations the Secretary shall take 

5 into account in issuing any regulations under 

6 this subparagraph and subparagraph (A) shall 

7 include the potential effects on lower-income 

8 employees as well as on adequacy of savings. 

9 ‘‘(C) PERMITTED ADDITIONAL PROCE10 DURES TO LIMIT CONTRIBUTIONS.—An em11 ployer— 

12 ‘‘(i) shall have no responsibility for 

13 any calendar year for determining whether, 

14 or ensuring that, the contributions with re15 spect to any employee do not exceed the 

16 deductible amount in effect for taxable 

17 years beginning in the calendar year under 

18 section 219(b)(5) (determined without re19 gard to subparagraph (B) thereof), and 

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

21 satisfy the requirements of this section or 

22 any other provision of this title merely be23 cause the employer chooses to limit the 

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1 endar year in a manner reasonably de2 signed to avoid exceeding such deductible 

3 amount. 

4 ‘‘(6) REQUIRED INVESTMENTS.— 

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

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

7 only in the class of assets or funds described in 

8 subparagraph (B) unless the employee elects a 

9 class of assets or funds described in subpara10 graph (C), (D), or (E). 

11 ‘‘(B) TARGET DATE OR LIFECYCLE OP12 TION.—The class of assets or funds described 

13 in this subparagraph is the class of assets or 

14 funds that constitutes a qualified default invest15 ment alternative under section 2550.404c– 

16 5(e)(4)(i) of title 29, Code of Federal Regula17 tions. 

18 ‘‘(C) PRINCIPAL PRESERVATION.—The 

19 class of assets or funds described in this sub20 paragraph is the class of assets or funds that 

21 is designed to protect the principal of the indi22 vidual on an ongoing basis, including passbook 

23 savings, certificates of deposit, insurance con24 tracts, mutual funds, United States savings 


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

2 similar assets specified in regulations. 

3 ‘‘(D) GUARANTEED LIFETIME INCOME OP4 TION OR EQUIVALENT.—The class of assets or 

5 funds described in this subparagraph is the 

6 class of assets or funds that is designed to pro7 vide an employee with the right to elect to re8 ceive distributions as a defined level of income 

9 annually (or more frequently) for at least the 

10 remainder of the life of the employee or the 

11 joint lives of the employee and the employee’s 

12 designated beneficiary. 

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

14 funds determined by the Secretary to be a 

15 qualified investment for purposes of this sec16 tion. 

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

18 purposes of this section— 

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

20 retirement bond’ means a bond issued under 

21 chapter 31 of title 31, United States Code, 

22 which by its terms, or by regulations prescribed 

23 by the Secretary under such chapter— 

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1 pected duration of the funds invested in 

2 such bonds and at rates determined or ad3 justed in a manner and with sufficient fre4 quency to provide substantial protection 

5 from inflation, 

6 ‘‘(ii) is not transferable, and 

7 ‘‘(iii) is designed for investment for 

8 retirement under automatic IRA arrange9 ments or other savings vehicles. 

10 ‘‘(B) INDIVIDUAL RETIREMENT PLAN

11 RULES APPLICABLE.—The provisions of this 

12 title applicable to an individual retirement plan 

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

14 provisions relating to contributions, holding and 

15 distributions, shall apply to a qualifying retire16 ment bond, except as determined by the Sec17 retary. 

18 ‘‘(C) ANNUAL STATEMENT.—As soon as 

19 practicable after the close of each calendar 

20 year, the Secretary shall make available an an21 nual statement to each participant on behalf of 

22 whom qualifying retirement bonds have been 

23 purchased, setting forth— 


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

2 the participant for such bonds during such 

3 calendar year, 

4 ‘‘(ii) amounts earned by any such 

5 bonds, whether purchased during such year 

6 or during a prior year, during such cal7 endar year, 

8 ‘‘(iii) the value of the participant’s ac9 count with respect to such bonds as of the 

10 close of such calendar year, 

11 ‘‘(iv) the importance of diversifying 

12 retirement savings, 

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

14 and diversified investment portfolio, 

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

16 of the Department of Labor for sources of 

17 information on individual investing and di18 versification, 

19 ‘‘(vii) the procedures for redeeming a 

20 qualifying retirement bond and directly 

21 transferring the redeemed amount into an 

22 individual retirement plan, 

23 ‘‘(viii) other factors affecting retire24 ment savings decisions, and 


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1 ‘‘(ix) such other information as the 

2 Secretary determines necessary or appro3 priate. 

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

5 employee for whom an automatic IRA is established 

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

7 such manner and form as the Secretary may pre8 scribe but not later than the due date of the return 

9 for the taxable year in which such automatic IRA is 

10 established, whether to treat the individual retire11 ment plan as described, or not described, in section 

12 408A. If no such election is made, the plan shall be 

13 treated as described in section 408A and shall meet 

14 the requirements of section 408A (including any ap15 propriate adjustment or conversion as may be pro16 vided by the Secretary). 

17 ‘‘(e) TREATMENT OF CONTRIBUTIONS.— 

18 ‘‘(1) IN GENERAL.—A contribution to an indi19 vidual retirement plan or purchase of a retirement 

20 bond on behalf of an employee under a qualifying 

21 automatic IRA arrangement shall be treated for pur22 poses of this title as if it had been made directly by 

23 the employee, including for purposes of limitations 

24 on contributions to individual retirement plans. 


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1 ‘‘(2) COORDINATION WITH WITHHOLDING.— 

2 The Secretary shall modify the withholding exemp3 tion certificate under section 3402(f) so that, in the 

4 case of any qualifying employee covered under an 

5 automatic IRA arrangement, any notice and election 

6 requirements with respect to the arrangement may 

7 be met through the use of an attachment to such 

8 certificate or other modifications of the withholding 

9 exemption procedures. 

10 ‘‘(3) INDIVIDUAL RETIREMENT PLAN RULES AP11 PLICABLE.—The provisions of this title applicable to 

12 an individual retirement plan (as defined in section 

13 7701(a)(37)), including provisions relating to con14 tributions, holding and distributions, shall apply to 

15 a qualifying retirement bond, except as determined 

16 by the Secretary. 

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

18 Secretary shall provide for procedures by which an 

19 individual may periodically elect to transfer quali20 fying retirement bonds (with their proceeds) held by 

21 the individual to an individual retirement account. 

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

24 than subparagraph (B) thereof). 


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1 ‘‘(f) MODEL NOTICE.—The Secretary, in coordina2 tion with the Director of the Consumer Financial Protec3 tion Bureau, shall— 

4 ‘‘(1) provide a model notice, written in a man5 ner calculated to be understandable to the average 

6 worker, that is simple for employers to use— 

7 ‘‘(A) to notify employees of the require8 ment under section 4980J for the employer to 

9 provide certain employees with the opportunity 

10 to participate in a qualifying automatic IRA ar11 rangement, and 

12 ‘‘(B) to satisfy the requirements of sub13 section (d)(3)(C), 

14 ‘‘(2) provide uniform forms for enrollment, in15 cluding automatic enrollment, in an automatic IRA 

16 arrangement, and 

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

18 means that small employers can access and use to 

19 obtain information on automatic IRA arrangements 

20 and to obtain required notices and forms. 

21 The information referred to in paragraph (3) shall be pro22 vided in a manner designed to assist employers and pro23 viders by facilitating the identification by employers of pri24 vate-sector providers of individual retirement plans and 


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1 associated investment options that are appropriate for use 

2 in automatic IRA arrangements. 

3 ‘‘(g) QUALIFYING STATE-FACILITATED AUTOMATIC

4 IRA.—For purposes of this section— 

5 ‘‘(1) IN GENERAL.—The term ‘qualifying State6 facilitated automatic IRA’ means an arrangement of 

7 an employer (determined without regard to whether 

8 the employer is required to maintain the arrange9 ment) which operates as part of a program main10 tained or facilitated by any State, if— 

11 ‘‘(A) such program is established and 

12 maintained as a State-sponsored or State-facili13 tated payroll deduction savings program using 

14 automatic enrollment and is expressly estab15 lished pursuant to State law providing specifi16 cally for such program, 

17 ‘‘(B) such program is implemented and ad18 ministered by the State establishing the pro19 gram, which is responsible for investing the em20 ployee savings or for selecting investment alter21 natives for employees to choose, 

22 ‘‘(C) such program treats employees as 

23 having automatically elected payroll deductions 

24 in an amount or percentage of compensation, 

25 including any automatic increases in such 


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1 amount or percentage, unless the employee spe2 cifically elects not to have such deductions 

3 made (or specifically elects to have the deduc4 tions made in a different amount or percentage 

5 of compensation allowed by the program), and 

6 provides that employees are given adequate ad7 vance notice of their right to make such elec8 tions, 

9 ‘‘(D) contributions under such program 

10 are invested in individual retirement plans or 

11 qualifying retirement bonds, 

12 ‘‘(E) such program generally requires par13 ticipation by certain employers in the State 

14 which do not offer their employees certain types 

15 of tax-favored retirement plans or arrangements 

16 specified in the terms of the program, 

17 ‘‘(F) under such program, employers do 

18 not make employer contributions, but are re19 quired to participate in activities including col20 lection of employee contributions through pay21 roll deduction and remittance of contributions 

22 to the program, maintenance of records regard23 ing such collections and remittances, provision 

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1 mation to the State necessary to facilitate the 

2 operation and administration of the program, 

3 ‘‘(G) employers participating in the pro4 gram receive no direct or indirect consideration 

5 for participation in the form of cash or other6 wise, other than consideration (including tax 

7 credits or other tax or financial incentives) re8 ceived directly from the State or from the Fed9 eral government, 

10 ‘‘(H) under such program, the State as11 sumes responsibility for the security of payroll 

12 deductions and employee savings, and 

13 ‘‘(I) under such program, the State adopts 

14 measures to ensure that employees are notified 

15 of their rights under the program and creates 

16 a mechanism for enforcement of those rights. 

17 For purposes of subparagraph (B), the State admin18 istering a program may delegate to and utilize one 

19 or more service or investment providers, or other 

20 private- or public-sector entities, to operate and ad21 minister the program, if the State retains full re22 sponsibility for the operation and administration of 

23 the program. 

24 ‘‘(2) PARTICIPATION AVAILABLE TO NON-EM25 PLOYEES.—A program of a State described in paraVerDate Sep 11 2014 03:16 Aug 08, 2019 Jkt 089200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S2370.IS S2370

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1 graph (1) may permit participation by individuals 

2 who are not employees, including self-employed indi3 viduals, independent contractors, sole proprietors, 

4 and partners. 

5 ‘‘(3) PROGRAM MAY BE MAINTAINED BY MUL6 TIPLE STATES.—The program described in para7 graph (1) may be part of a multi-State program, 

8 plan, compact, alliance, partnership, or other multi9 State or regional arrangement. 

10 ‘‘(4) STATE.—For purposes of this section, the 

11 term ‘State’ has the meaning given such term in sec12 tion 3(10) of the Employee Retirement Income Se13 curity Act of 1974, except that such term also in14 cludes any governmental agency or instrumentality 

15 of a State. 

16 ‘‘(h) CROSS REFERENCE.—For provision preempting 

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

18 IRA Act of 2019.’’. 

19 (b) MANDATORY TRANSFERS.—Section 

20 401(a)(31)(B)(i) of the Internal Revenue Code of 1986 

21 is amended— 

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

23 through a qualifying automatic IRA arrangement 

24 (as defined in section 408B))’’ after ‘‘individual re25 tirement plan’’ each place it appears, and 


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•S 2370 IS

1 (2) by adding at the end the following new sen2 tence: ‘‘Any amount so transferred (and any earn3 ings thereon) shall be invested only in investments 

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

5 (c) PENALTY FOR FAILURE TO TIMELY REMIT CON6 TRIBUTIONS TO AUTOMATIC IRA ARRANGEMENTS.—Sec7 tion 4975(c) of the Internal Revenue Code of 1986 is 

8 amended by adding at the end the following new para9 graph: 

10 ‘‘(7) SPECIAL RULE FOR QUALIFYING AUTO11 MATIC IRA ARRANGEMENTS.—For purposes of para12 graph (1), if an employer is required under a quali13 fying automatic IRA arrangement under section 

14 408B to deposit amounts withheld from an employ15 ee’s compensation into an individual retirement ac16 count or toward the purchase of a qualifying retire17 ment bond (as defined in section 408B(d)(7)) but 

18 fails to do so within the time prescribed under sec19 tion 408B(d)(3)(A), such amounts shall be treated 

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

21 (d) COORDINATION WITH EMPLOYEE RETIREMENT

22 INCOME SECURITY ACT OF 1974.— 

23 (1) EXEMPTION.— 


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

2 Employee Retirement Income Security Act of 

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

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

6 (ii) by adding at the end the following 

7 new subparagraph: 

8 ‘‘(C) A qualifying automatic IRA arrange9 ment described in section 408B of the Internal 

10 Revenue Code of 1986 shall not be treated as 

11 an employee pension benefit plan or pension 

12 plan if, under the arrangement, contributions 

13 are to be made to an individual retirement ac14 count the provider of which is included in the 

15 website list established under section 

16 408B(f)(3) of such Code, are to be made to an 

17 individual retirement plan designated by the 

18 employee, or are to be invested in qualifying re19 tirement bonds (as defined in section 

20 408B(d)(7)).’’. 

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

23 by subparagraph (A), an individual retirement 

24 plan established pursuant to an automatic IRA 

25 arrangement described in section 408B(d) of 


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•S 2370 IS

1 the Internal Revenue Code of 1986 shall, for 

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

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

6 an employee benefit plan established under the 

7 Employee Retirement Income Security Act of 

8 1974. 

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

10 such Act is amended by adding at the end the fol11 lowing new paragraph: 

12 ‘‘(6) In the case of an individual retirement ac13 count opened under a qualifying automatic IRA ar14 rangement under section 408B of such Code that is 

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

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

17 treated as exercising control over the assets in the 

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

19 been given to an employee that such account has 

20 been established on behalf of the employee. No re21 ports, other than those required under section 

22 101(g), shall be required with respect to an account 

23 opened under a qualifying automatic IRA arrange24 ment under section 408B of such Code.’’. 


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1 (e) NOTICE OF AVAILABILITY OF INVESTMENT

2 GUIDELINES.— 

3 (1) IN GENERAL.—Section 408(i) of the Inter4 nal Revenue Code of 1986 is amended by adding at 

5 the end the following new sentence: ‘‘Any report fur6 nished under paragraph (2) to an individual shall in7 clude notice of the Internet website of the Depart8 ment of Labor for sources of information on indi9 vidual investing and diversification.’’. 

10 (2) UPDATED INFORMATION.—Such informa11 tion shall be modified (or updated) by the Secretary 

12 of Labor in consultation with the Secretary of the 

13 Treasury and the Chairman of the Securities and 

14 Exchange Commission to address needed changes 

15 due to the creation of automatic IRAs. 

16 (f) FAILURE TO PROVIDE QUALIFYING AUTOMATIC

17 IRA ARRANGEMENTS.—Chapter 43 of the Internal Rev18 enue Code of 1986 is amended by adding at the end the 

19 following new section: 

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

21 TO PROVIDE QUALIFYING AUTOMATIC IRA 

22 ARRANGEMENTS. 

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

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

25 section 408B) to maintain a qualifying IRA arrangement 


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

2 under such arrangement, for a calendar year. 

3 ‘‘(b) AMOUNT.— 

4 ‘‘(1) IN GENERAL.—The amount of the tax im5 posed by subsection (a) on any failure for any cal6 endar year shall be $100 with respect to each quali7 fying employee (as defined in section 408B(c)) to 

8 whom such failure relates. 

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

10 DISCOVERED AND REASONABLE DILIGENCE EXER11 CISED.—No tax shall be imposed by subsection (a) 

12 on any failure during any period for which it is es13 tablished to the satisfaction of the Secretary that the 

14 employer subject to liability for the tax did not know 

15 that the failure existed and exercised reasonable dili16 gence to maintain a qualifying IRA arrangement 

17 and to meet the requirements under such arrange18 ment. 

19 ‘‘(3) TAX NOT TO APPLY TO FAILURES COR20 RECTED WITHIN 90 DAYS.—No tax shall be imposed 

21 by subsection (a) on any failure if— 

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

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1 rangement and to meet the requirements under 

2 such arrangement, and 

3 ‘‘(B) the employer provides a qualifying 

4 automatic IRA arrangement described in sec5 tion 408B to each qualifying employee (as de6 fined in section 408B) by the end of the 90-day 

7 period beginning on the first date the employer 

8 knew, or exercising reasonable diligence would 

9 have known, that such failure existed. 

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

11 failure which is due to reasonable cause and not to 

12 willful neglect, the Secretary may waive part or all 

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

14 that the payment of such tax would be excessive or 

15 otherwise inequitable relative to the failure involved. 

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

17 prescribe and implement procedures for obtaining con18 firmation of whether employers are subject to the tax im19 posed by subsection (a). The Secretary, in the Secretary’s 

20 discretion, may prescribe that the confirmation shall be 

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

22 for this purpose the annual report or quarterly report for 

23 employment taxes, or such other means as the Secretary 

24 may deem advisable.’’. 


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1 (g) WAIVER OF EARLY WITHDRAWAL PENALTY FOR

2 CERTAIN DISTRIBUTIONS FOLLOWING INITIAL ELECTION

3 TO PARTICIPATE IN AUTOMATIC IRA ARRANGEMENT.— 

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

5 amended by adding at the end the following new para6 graph: 

7 ‘‘(11) DISTRIBUTION FOLLOWING INITIAL

8 ELECTION TO PARTICIPATE IN AUTOMATIC IRA AR9 RANGEMENT.—Paragraph (1) shall not apply in the 

10 case of a distribution to a qualifying employee made 

11 not later than 90 days after the initial election 

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

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

14 States Code, is amended— 

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

16 after ‘‘408A’’, and 

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

18 qualifying automatic IRA arrangement described in 

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

20 (i) CONFORMING AMENDMENTS.— 

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

22 I of subchapter D of chapter 1 of the Internal Rev23 enue Code of 1986 is amended by inserting after the 

24 item relating to section 408A the following new 

25 item: 

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


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

2 Act is amended by adding at the end the following 

3 new item: 

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

4 (j) PREEMPTION OF CONFLICTING STATE LAWS.— 

5 The amendments made by this section shall supersede any 

6 law of a State that would directly or indirectly prohibit 

7 or restrict the establishment or operation of a qualifying 

8 automatic IRA arrangement meeting the requirements of 

9 section 408B of the Internal Revenue Code of 1986. Noth10 ing in such amendments shall be construed to impair or 

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

12 for the failure to make payroll deposit payments under any 

13 such automatic IRA arrangement within the period re14 quired under such section 408B. 

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

16 this section shall apply to calendar years beginning after 

17 December 31, 2020. 

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

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

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

21 shall issue guidance defining the class of guaranteed life22 time income or equivalent arrangements which meet the 

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

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


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1 SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING 

2 QUALIFYING AUTOMATIC IRA ARRANGE3 MENTS. 

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 is amended by adding at the end the following new 

7 section: 

8 ‘‘SEC. 45T. SMALL EMPLOYER AUTOMATIC IRA ARRANGE9 MENT. 

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

11 in the case of an eligible employer maintaining a quali12 fying automatic IRA arrangement meeting the require13 ments of section 408B (without regard to whether the em14 ployer is a covered employer), the small employer auto15 matic IRA arrangement credit determined under this sec16 tion for any taxable year in the credit period is the amount 

17 determined under subsection (b). 

18 ‘‘(b) AMOUNT OF CREDIT.— 

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

20 determined under this section for any taxable year 

21 with respect to an eligible employer shall be the sum 

22 of— 

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

24 qualifying employees (within the meaning of 

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

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1 rangement referred to in subsection (a) for the 

2 calendar year in which the taxable year begins, 

3 plus 

4 ‘‘(B) the amount determined under para5 graph (2) with respect to the taxable year. 

6 ‘‘(2) AMOUNT DETERMINED.—The amount de7 termined under this paragraph is— 

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

9 which begins in the first calendar year in which 

10 the eligible employer maintains the qualifying 

11 automatic IRA arrangement, 

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

13 which begins in the second calendar year in 

14 which the eligible employer maintains such ar15 rangement, and 

16 ‘‘(C) $0 thereafter. 

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

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

19 not exceed $250. 

20 ‘‘(4) COORDINATION WITH SMALL EMPLOYER

21 STARTUP CREDIT.— 

22 ‘‘(A) IN GENERAL.—No credit shall be al23 lowed under this section to the employer for 

24 any taxable year if a credit is determined under 


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•S 2370 IS

1 section 45E with respect to the employer for 

2 the taxable year. 

3 ‘‘(B) EXTENSION OF CREDIT.—If the eligi4 ble employer maintains a qualifying automatic 

5 IRA arrangement meeting the requirements of 

6 section 408B (without regard to whether the 

7 employer is a covered employer) with respect to 

8 any of the first 3 calendar years for which the 

9 employer could adopt such an arrangement, and 

10 subsequently adopts an eligible employer plan 

11 for its employees for any of those years which 

12 it maintains throughout such 3-calendar-year 

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

14 with respect to the eligible employer by sub15 stituting ‘3 taxable years’ for ‘2 taxable years’. 

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

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

18 employer’ means, with respect to the calendar year 

19 in which the taxable year begins, an employer 

20 which— 

21 ‘‘(A) maintains a qualifying automatic IRA 

22 arrangement meeting the requirements of sec23 tion 408B (without regard to whether the em24 ployer is a covered employer), 


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•S 2370 IS

1 ‘‘(B) on each day during the preceding cal2 endar year, had no more than 100 employees, 

3 and 

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

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

6 during the portion of the calendar year pre7 ceding the adoption of the qualifying automatic 

8 IRA arrangement and the 2 preceding calendar 

9 years. 

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

11 means the first 6 calendar years in which the eligible 

12 employer maintains the qualifying automatic IRA 

13 arrangement. 

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

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

16 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI17 NESS CREDIT.—Section 38(b) of the Internal Revenue 

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

19 of paragraph (31), by striking the period at the end of 

20 paragraph (32) and inserting ‘‘, plus’’, and by adding at 

21 the end the following new paragraph: 

22 ‘‘(33) the small employer automatic IRA ar23 rangement credit determined under section 

24 45T(a).’’. 


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

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

3 of the Internal Revenue Code of 1986 is amended by add4 ing at the end the following new item: 

‘‘Sec. 45T. Small employer automatic IRA arrangement.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2020. 

8 SEC. 4. INCREASE IN CREDIT LIMITATION FOR SMALL EM9 PLOYER PENSION PLAN STARTUP COSTS. 

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

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

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

13 taxable years immediately following the first credit 

14 year, the greater of— 

15 ‘‘(A) $500, or 

16 ‘‘(B) the lesser of— 

17 ‘‘(i) $250 for each employee of the eli18 gible employer who is not a highly com19 pensated employee (as defined in section 

20 415(q)) and who is eligible to participate 

21 in the eligible employer plan maintained by 

22 the eligible employer, or 

23 ‘‘(ii) $5,000, and’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2019. 

Æ 


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