II 

117TH CONGRESS 

2D SESSION S. 4406 

To amend the Internal Revenue Code of 1986 to provide incentives for 

the use of automatic portability arrangements under defined contribution 

plans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 15, 2022 

Mr. SCOTT of South Carolina (for himself and Mr. BROWN) 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 provide 

incentives for the use of automatic portability arrangements under defined contribution plans, 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 ‘‘Advancing Auto-Port5 ability Act of 2022’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds as follows: 


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1 (1) Up to $105,000,000,000 of retirement sav2 ings leaves the defined contribution pension plan 

3 system annually because employees cash out their 

4 savings after a job change. 

5 (2) Federal law should encourage the private 

6 sector to reduce such cash-outs by developing auto7 mated solutions to improve defined contribution plan 

8 portability. 

9 SEC. 3. PROHIBITED TRANSACTION EXEMPTION. 

10 (a) IN GENERAL.—Section 4975(d) of the Internal 

11 Revenue Code of 1986 is amended— 

12 (1) by striking ‘‘or’’ at the end of paragraph 

13 (22)(I), 

14 (2) by striking the period at the end of para15 graph (23) and inserting ‘‘, or’’, and 

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

17 paragraph: 

18 ‘‘(24) any transaction described in subpara19 graph (D) or (E) of subsection (c)(1) which consists 

20 of the receipt of fees by an automatic portability 

21 provider in connection with such provider’s exercise 

22 of discretion with respect to an automatic portability 

23 transaction.’’. 


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1 (b) DEFINITIONS.—Section 4975(f) of the Internal 

2 Revenue Code of 1986 is amended by adding at the end 

3 the following new paragraph: 

4 ‘‘(12) RULES RELATING TO AUTOMATIC PORT5 ABILITY TRANSACTIONS.— 

6 ‘‘(A) IN GENERAL.—For purposes of sub7 section (d)(24)— 

8 ‘‘(i) AUTOMATIC PORTABILITY TRANS9 ACTION.—An automatic portability trans10 action is a transfer of assets made— 

11 ‘‘(I) from an individual retire12 ment plan which is established on be13 half of an individual and to which 

14 amounts were transferred under sec15 tion 401(a)(31)(B)(i), 

16 ‘‘(II) to an employer-sponsored 

17 retirement plan described in clause 

18 (iii), (iv), (v), or (vi) of section 

19 402(c)(8)(B) (other than a defined 

20 benefit plan) in which such individual 

21 is an active participant, and 

22 ‘‘(III) after such individual has 

23 been given advance notice of the 

24 transfer and has not affirmatively 

25 opted out of such transfer. 


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1 ‘‘(ii) AUTOMATIC PORTABILITY PRO2 VIDER.—An automatic portability provider 

3 is a person that executes transfers de4 scribed in clause (i). 

5 ‘‘(B) CONDITIONS FOR AUTOMATIC PORT6 ABILITY TRANSACTIONS.—Subsection (d)(24) 

7 shall not apply to an automatic portability 

8 transaction unless the following requirements 

9 are satisfied: 

10 ‘‘(i) ACKNOWLEDGMENT OF FIDU11 CIARY STATUS.—An automatic portability 

12 provider shall acknowledge in writing, at 

13 such time and format as specified by the 

14 Secretary, that the provider is a fiduciary 

15 with respect to the individual on whose be16 half the individual retirement plan de17 scribed in subparagraph (A)(i)(I) is estab18 lished. 

19 ‘‘(ii) FEES.—The fees and compensa20 tion received by the automatic portability 

21 provider in connection with the automatic 

22 portability transaction shall not exceed rea23 sonable compensation and must be ap24 proved in writing by the plan fiduciary for 


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1 the plan described in subparagraph 

2 (A)(i)(II). 

3 ‘‘(iii) DATA USAGE.—The automatic 

4 portability provider shall not market or sell 

5 data relating to the individual retirement 

6 plan described in subparagraph (A)(i)(I). 

7 ‘‘(iv) OPEN PARTICIPATION.—The 

8 automatic portability provider shall offer 

9 automatic portability transactions on the 

10 same terms to any plan described in sub11 paragraph (A)(i)(II) regardless of whether 

12 the provider provides other services for 

13 such plan. 

14 ‘‘(v) PRE-TRANSACTION NOTICE.—At 

15 least 30 days in advance of an automatic 

16 portability transaction, the automatic port17 ability provider shall provide notice to the 

18 individual on whose behalf the individual 

19 retirement plan described in subparagraph 

20 (A)(i)(I) is established which includes— 

21 ‘‘(I) a description of the auto22 matic portability transaction and the 

23 fees which will be charged in connec24 tion with the transaction, 


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1 ‘‘(II) a description of the individ2 ual’s right to affirmatively elect not to 

3 participate in the transaction, the pro4 cedures for such an election, and a 

5 telephone number at which the indi6 vidual can contact the automatic port7 ability provider, and 

8 ‘‘(III) such other disclosures as 

9 the Secretary may require by regula10 tion. 

11 ‘‘(vi) POST-TRANSACTION NOTICE.— 

12 Not later than 3 business days after an 

13 automatic portability transaction, the auto14 matic portability provider shall provide no15 tice to the individual on whose behalf the 

16 individual retirement plan described in 

17 subparagraph (A)(i)(I) is established of— 

18 ‘‘(I) the actions taken by the 

19 automatic portability provider with re20 spect to the individual’s account, 

21 ‘‘(II) all relevant information re22 garding the location and amount of 

23 any transferred assets, 

24 ‘‘(III) a statement of fees 

25 charged against the account by the 


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1 automatic portability provider or its 

2 affiliates in connection with the trans3 fer, 

4 ‘‘(IV) a telephone number at 

5 which the individual can contact the 

6 automatic portability provider, and 

7 ‘‘(V) such other disclosures as 

8 the Secretary may require by regula9 tion. 

10 ‘‘(vii) NOTICE REQUIREMENTS.—The 

11 notices required under clauses (v) and (vi) 

12 shall be written in a manner calculated to 

13 be understood by the average intended re14 cipient and shall not include materially 

15 misleading statements. 

16 ‘‘(viii) TIMELINESS OF EXECUTION.— 

17 After liquidating the assets of an indi18 vidual retirement plan described in sub19 paragraph (A)(i)(I) to cash, an automatic 

20 portability provider shall transfer the ac21 count balance of such plan as soon as 

22 practicable to the plan described in sub23 paragraph (A)(i)(II). 

24 ‘‘(ix) RECORD RETENTION AND AU25 DITS.— 


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1 ‘‘(I) IN GENERAL.—An automatic 

2 portability provider shall, for 6 years, 

3 maintain the records sufficient to 

4 demonstrate the terms of this sub5 paragraph have been met. 

6 ‘‘(II) AUDITS.—An automatic 

7 portability provider shall conduct an 

8 annual audit of automatic portability 

9 transactions occurring during the cal10 endar year to demonstrate compliance 

11 with this subparagraph, and shall sub12 mit such audit annually to the Sec13 retary, in such form and manner as 

14 specified by the Secretary.’’. 

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

16 this section shall apply to transactions occurring after De17 cember 31, 2023. 

18 SEC. 4. EMPLOYER AUTOMATIC PORTABILITY ARRANGE19 MENT TAX CREDIT. 

20 (a) IN GENERAL.—Subpart D of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of 

22 1986 is amended by adding at the end the following new 

23 section: 


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1 ‘‘SEC. 45U. EMPLOYER AUTOMATIC PORTABILITY AR2 RANGEMENT CREDIT. 

3 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

4 the case of an eligible employer, the automatic portability 

5 arrangement credit determined under this section for the 

6 adoption year is an amount equal to $500. 

7 ‘‘(b) ELIGIBLE EMPLOYER.—For purposes of this 

8 section, the term ‘eligible employer’ has the meaning given 

9 the term by section 408(p)(2)(C)(i) (without regard to 

10 subclause (II) thereof). 

11 ‘‘(c) ADOPTION YEAR.—For purposes of this sec12 tion— 

13 ‘‘(1) IN GENERAL.—The term ‘adoption year’ 

14 means the taxable year during which the eligible em15 ployer adopts an automatic portability arrangement 

16 as part of an eligible plan maintained by the em17 ployer. 

18 ‘‘(2) AUTOMATIC PORTABILITY ARRANGE19 MENT.— 

20 ‘‘(A) IN GENERAL.—The term ‘automatic 

21 portability arrangement’ means an arrangement 

22 providing for automatic portability transactions. 

23 ‘‘(B) AUTOMATIC PORTABILITY TRANS24 ACTION.—The term ‘automatic portability 

25 transaction’ means a transaction in which 

26 amounts distributed pursuant to section 


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1 401(a)(31)(B)(i) from a plan to an individual 

2 retirement plan established on behalf of an indi3 vidual are subsequently transferred to an eligi4 ble plan in which such individual is an active 

5 participant, after such individual has been given 

6 advance notice of the transfer and has not af7 firmatively opted out of such transfer. 

8 ‘‘(3) ELIGIBLE PLAN.—The term ‘eligible plan’ 

9 means a qualified employer plan as defined in sec10 tion 4972(d)(1), other than a defined benefit plan.’’. 

11 (b) CREDIT TO BE PART OF GENERAL BUSINESS

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

13 Revenue Code of 1986 is amended by striking ‘‘plus’’ at 

14 the end of paragraph (32), by striking the period at the 

15 end of paragraph (33) and inserting ‘‘, plus’’, and by add16 ing at the end the following new paragraph: 

17 ‘‘(34) in the case of an eligible employer (as de18 fined in section 45U(b)), the automatic portability 

19 arrangement credit determined under section 

20 45U(a).’’. 

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

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

23 of the Internal Revenue Code of 1986 is amended by add24 ing at the end the following new item: 

‘‘Sec. 45U. Employer automatic portability arrangement credit.’’. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

Æ 


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