Automatic Retirement Plan Act of 2017

To amend the Internal Revenue Code of 1986 to expand retirement plan coverage, increase retirement security, and for other purposes. 1. Short title; table of contents (a) Short title This Act may be cited as the Automatic Retirement Plan Act of 2017 (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Employers required to maintain automatic contribution plan. Sec. 3. Deferral-only arrangements. Sec. 4. Nondiscrimination testing changes to facilitate higher contributions. Sec. 5. Multiple employer plans. Sec. 6. Limitation on employer liability. Sec. 7. Portability of lifetime income options. Sec. 8. Increase in credit limitation for small employer pension plan startup costs. Sec. 9. Small employer automatic enrollment credit. Sec. 10. Treatment of automatic contribution plans under State law. Sec. 11. Matching payments for elective deferral and IRA contributions by certain individuals. Sec. 12. Authority to require reporting. 2. Employers required to maintain automatic contribution plan (a) Automatic contribution plan Section 414 (aa) Automatic contribution plan For purposes of this title— (1) In general The term automatic contribution plan (A) is described in clause (i), (ii), or (iv) of section 219(g)(5)(A), (B) is described in paragraph (2), and (C) meets the eligibility, investment, lifetime income, and fee requirements described in paragraphs (3), (4), (5), and (6), respectively, of this subsection. (2) Plan described A plan is described in this paragraph if the plan is one of the following: (A) Deferral only A deferral only arrangement that meets the requirements of section 401(k)(14). (B) 403( b A 403(b) plan that— (i) meets the requirements of section 401(k)(14), or (ii) would be described in subparagraph (C) without regard to the references to section 416. (C) Testing automatic contribution plan A plan that— (i) would qualify as a plan described in subparagraph (A), except that such plan allows employer contributions, and (ii) satisfies sections 401(k)(3)(A)(ii), 401(m)(2), and 416 taking into account all applicable rules, including— (I) paragraphs (11), (12), and (13) of section 401(k), (II) paragraphs (10), (11), and (12) of section 401(m), and (III) section 416(g)(4)(H). (D) Grandfathered automatic contribution plan A plan described in clause (i), (ii), (iv), (v), or (vi) of section 219(g)(5)(A) that— (i) is maintained by an employer as of the date of enactment of the Automatic Retirement Plan Act of 2017 (ii) has been maintained by such employer (or a predecessor employer) for at least 1 year before such date of enactment, and (iii) except as provided by the Secretary, has not had its coverage or benefits substantially decreased for any plan year beginning after such date of enactment. (3) Eligibility requirements (A) In general Subject to subparagraph (B), the eligibility requirements described in this paragraph are that all employees of the employer are eligible to participate in an automatic contribution plan maintained by the employer. (B) Certain exclusions Subparagraph (A) shall not apply to the following: (i) Individuals less than 21 years old The employer may, but need not, include an employee who has not attained age 21 in an automatic contribution plan maintained by the employer. (ii) Certain other employees The employer may, but need not, include an employee described in section 410(b)(3) in an automatic contribution plan maintained by the employer. (iii) Part time employees, etc No employee may be treated as ineligible in an automatic contribution plan maintained by the employer solely by reason of working on a part-time, temporary, or seasonal basis, except as otherwise provided in this subparagraph. (iv) New employee The employer may, but need not, exclude an employee from an automatic contribution plan maintained by the employer until the first day of the second calendar month beginning on or after the day the individual begins work for the employer. (v) Seasonal or temporary employees The employer may, but need not, exclude an employee from an automatic contribution plan maintained by the employer to the extent that such employee is not expected to work during more than three months during the 12-month period starting when such employee would otherwise be required to be eligible under such plan. (C) Special rules for controlled groups Eligible employees within an employer need not be eligible to participate in the same automatic contribution plan. For purposes of this subsection, the term employer (D) Special rules for grandfathered plans This paragraph shall not apply to a plan described in paragraph (2)(D) until the sixth plan year beginning on or after the date of enactment of the Automatic Retirement Plan Act of 2017 eighth sixth (4) Investment requirements Except in the case of a plan that is an automatic contribution plan by reason of paragraph (2)(D), any investment made in the absence of an investment election by a participant or beneficiary shall be invested in accordance with regulations prescribed by the Secretary of Labor under section 404(c)(5) of the Employee Retirement Income Security Act of 1974. (5) Lifetime income requirements Except in the case of a plan that is an automatic contribution plan by reason of paragraph (2)(D), the lifetime income requirements described in this paragraph are— (A) Guaranteed income for life available A plan shall not be treated as an automatic contribution plan unless the plan permits participants to elect to receive at least 50 percent of their vested account balance in a form of distribution described in section 401(a)(38)(B)(iii). (B) Exceptions This paragraph shall not apply with respect to any participant whose vested account balance is $5,000 or less at the time of distribution. (6) Fee requirements Under the fee requirements of this paragraph, no participant may be charged unreasonable fees solely on the basis that the participant’s balance in an automatic contribution plan is small or solely on the basis that adoption of such a plan by the employee’s employer is mandatory. . (b) Excise tax for failure To maintain automatic contribution plan Chapter 43 of such Code is amended by adding at the end the following new section: 4980J. Failure to maintain automatic contribution plan (a) General rule (1) In general There is hereby imposed a tax on the failure of an employer to make eligible to participate in an automatic contribution plan maintained by the employer any employee of the employer who, under the terms of section 414(aa), would be required to be eligible to participate in an automatic contribution plan maintained by the employer. (2) Exceptions (A) Paragraph (1) shall not apply to an employer to the extent such employer participates in an arrangement under a qualified State law under section 514(f)(2) of the Employee Retirement Income Security Act of 1974. (B) Paragraph (1) shall not apply to an employer with respect to any employee who is eligible to participate in a different automatic contribution plan than one or more other employees of the employer. (b) Amount of tax (1) In general The amount of the tax imposed by subsection (a) on any failure with respect to an employee shall be $10 for each day in the noncompliance period with respect to such failure. (2) Noncompliance period For purposes of this section, the term noncompliance period (A) beginning on the date such failure first occurs, and (B) ending on the earlier of— (i) the date such failure is corrected, or (ii) with respect to any employer, the date that is 3 months after the last date on which the employee is required to be eligible to participate in an automatic contribution plan maintained by such employer. (c) Limitations on amount of tax (1) Tax not to apply where failure not discovered exercising reasonable diligence No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that none of the persons referred to in subsection (e) knew that such failure existed. (2) Tax not to apply to failures corrected within 9 ½ No tax shall be imposed by subsection (a) on any failure if— (A) such failure was due to reasonable cause and not to willful neglect, and (B) such failure is corrected during the 9 ½ (3) Overall limitation for unintentional failures In the case of failures which are due to reasonable cause and not to willful neglect— (A) General rule The tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed $500,000. (B) Taxable years in the case of certain controlled groups For purposes of this subparagraph, if not all persons who are treated as a single employer for purposes of this section have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561. (4) Waiver by Secretary In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved. (d) Tax not To apply in certain cases This section shall not apply in the case of— (1) any failure of an employer to meet the requirements of subsection (a) with respect to any employee if the failure with respect to such employee occurred during the calendar year immediately following a calendar year during which all employers maintaining such plan normally employed 10 or fewer employees on a typical business day, (2) any governmental plan (within the meaning of section 414(d)), (3) any church plan (within the meaning of section 414(e)), or (4) employers that have not been in existence for three years, taking into account all predecessor employers. (e) Liability for tax The employer shall be liable for the tax imposed by subsection (a) on a failure. All employers, determined without regard to subsection (f)(2), shall be jointly and severally liable for the liability of any other employer with which they are aggregated under subsection (f)(2). (f) Definitions For purposes of this section— (1) the term automatic contribution plan (2) the term employer . (c) Clerical amendment The table of sections for chapter 43 Sec. 4980J. Failure to maintain automatic contribution plan. . (d) Effective date (1) In general The amendments made by subsection (a) shall apply to years beginning after December 31, 2017. (2) Delayed effective date (A) Large employers Except as provided in subparagraph (B), the amendments made by subsections (b) and (c) shall apply to years beginning after December 31, 2019. (B) Small employers In the case of an eligible employer (as defined in section 408(p)(2)(C)(i) 3. Deferral-only arrangements (a) In general Subsection (k) of section 401 (14) Deferral-only arrangement (A) In general A deferral-only arrangement shall be treated as meeting the requirements of paragraph (3)(A)(ii). (B) Deferral-only arrangement For purposes of this paragraph, the term deferral-only arrangement (i) the automatic deferral requirements of subparagraph (C), (ii) the elective contribution requirement of subparagraph (D), and (iii) the requirements of subparagraph (E) of paragraph (13). (C) Automatic deferral (i) In general The requirements of this subparagraph are met if, under the arrangement, each employee eligible to participate in the arrangement who is not contributing or is contributing less than the qualified percentage applicable to an eligible employee in the first year of eligibility is treated as having elected in applicable years to have the employer make elective contributions in an amount equal to the qualified percentage of compensation applicable under clause (iii). In the absence of an election out as described in clause (ii), such election shall, as adjusted under clause (iii), remain in effect for all subsequent years, regardless of whether such years are applicable years. (ii) Election out The election treated as having been made under clause (i) shall cease to apply with respect to any employee if such employee makes an affirmative election— (I) to not have such contributions made, or (II) to make elective contributions at a level specified in such affirmative election. (iii) Qualified percentage For purposes of this subparagraph, with respect to any employee, the term qualified percentage (I) at least 6 percent, but not greater than 10 percent, during the period ending on the last day of the first plan year which begins after the date on which the first elective contribution described in clause (i) is made with respect to such employee (disregarding any elective contribution made for any preceding year that preceded a year in which the employee made an affirmative election described in clause (ii)), (II) at least 7 percent during the first plan year following the plan year described in subclause (I), (III) at least 8 percent during the first plan year following the plan year described in subclause (II), (IV) at least 9 percent during the first plan year following the plan year described in subclause (III), and (V) At least 10 percent during any subsequent plan year. (iv) Applicable year every third year (I) In general For purposes of this subparagraph, the term applicable year (II) Exception Following any applicable year of the employee (determined after the application of this subclause), the plan may elect to treat the next one or two plan years as not being applicable years with respect to such employee. (D) Elective contributions (i) In general The requirements of this subparagraph are met if under the plan containing the arrangement— (I) the only contributions which may be made are elective contributions of employees who are eligible to participate in the arrangement, and (II) the aggregate amount of such elective contributions which may be made with respect to any employee for any calendar year shall not exceed $8,000. (ii) Cost of living adjustment In the case of any calendar year beginning after December 31, 2018, the $8,000 amount under clause (i) shall be adjusted in the same manner as cost of living adjustments are made under section 402(g)(4), except that 2017 2005 (iii) Cross reference For catch-up contributions for individuals age 50 or over, see section 414(v). . (b) Catch-Up contributions for individuals age 50 and over (1) Clause (i) of section 414(v)(2)(B) of such Code is amended by inserting , 401(k)(14), 401(k)(11) (2) Section 414(v)(2)(B) of such Code is amended by adding at the end thereof the following clause: (iii) in the case of an applicable employer plan described in section 401(k)(14), the applicable dollar amount is $1,000. . (3) Section 414(v)(2)(C) of such Code is amended by— (A) by striking (B)(i) and (B)(i), subparagraph (B)(ii) , and the $1,000 amount described in subparagraph (B)(iii) (B) inserting after 2005 (the calendar quarter beginning July 1, 2017, in the case of the $1,000 amount described in subparagraph (B)(iii)) (c) Simplified reporting Section 104(a)(2)(A) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1024(a)(2) or for any pension plan which is a deferral-only arrangement described in section 401(k)(14)(B) (d) Plans not treated as top-Heavy plans Clause (i) of section 416(g)(4)(H) of such Code is amended by striking or 401(k)(13) 401(k)(13), or 401(k)(14) (e) Effective date The amendments made by this section shall apply to plan years beginning after December 31, 2017. 4. Nondiscrimination testing changes to facilitate higher contributions (a) In general Clause (iii) of section 401(k)(13)(C) , does not exceed 10 percent, and is at least and is (b) Conforming amendments (1) Subclause (I) of section 401(k)(13)(C)(iii) of such Code is amended by striking 3 percent at least 3 percent, but not greater than 10 percent, (2) Subclause (II) of section 401(k)(13)(C)(iii) of such Code is amended by striking 4 percent at least 4 percent (3) Subclause (III) of section 401(k)(13)(C)(iii) of such Code is amended by striking 5 percent at least 5 percent (4) Subclause (IV) of section 401(k)(13)(C)(iii) of such Code is amended by striking 6 percent at least 6 percent (c) Matching contributions Clause (i) of section 401(m)(11)(B) of such Code is amended by striking 6 10 (d) Effective date The amendments made by this section shall apply to plan years beginning after December 31, 2017. 5. Multiple employer plans (a) Qualification requirements (1) In general Section 413 (g) Application of qualification requirements for certain multiple employer plans with pooled plan providers (1) In general Except as provided in paragraph (2), a defined contribution plan to which subsection (c) applies shall not be treated as failing to meet the requirements under this title applicable to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, merely because one or more employers of employees covered by the plan fail to take such actions as are required of such employers for the plan to meet such requirements if the plan— (A) is sponsored by employers all of which have both a common interest other than having adopted the plan and control of the plan, or (B) in the case of a plan not described in subparagraph (A), has a pooled plan provider. (2) Limitations (A) In general Paragraph (1) shall not apply to any plan unless the terms of the plan provide that in cases of employers failing to take the actions described in paragraph (1)— (i) the assets of the plan attributable to employees of the employer will be transferred to a plan maintained only by the employer (or its successor), to an eligible retirement plan as defined in section 402(c)(8)(B) for each individual whose account is transferred, or to any other arrangement that the Secretary determines is appropriate, unless the Secretary determines it is in the best interests of such employees to retain the assets in the plan, and (ii) the employer described in clause (i) (and not the plan with respect to which the failure occurred or any other participating employer in such plan) shall, except to the extent provided by the Secretary, be liable for any liabilities with respect to such plan attributable to employees of the employer. (B) Failures by pooled plan providers If the pooled plan provider of a plan described in paragraph (1)(B) does not perform substantially all of the administrative duties which are required of the provider under paragraph (3)(A)(i) for any plan year, the Secretary, in the Secretary’s own discretion, may provide that the determination as to whether the plan meets the requirements under this title applicable to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, shall be made in the same manner as would be made without regard to paragraph (1). (3) Pooled plan provider For purposes of this subsection— (A) In general The term pooled plan provider (i) is designated by the terms of the plan as a named fiduciary (as defined in section 402(a)(2) of the Employee Retirement Income Security Act of 1974), as the plan administrator, and as the person responsible to perform all administrative duties (including conducting proper testing with respect to the plan and employees of each participating employer) which are reasonably necessary to ensure that— (I) the plan meets any requirement applicable under the Employee Retirement Income Security Act of 1974 or this title to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, and (II) each participating employer takes such actions as the Secretary or such person determines are necessary for the plan to meet the requirements described in subclause (I), including providing to such person any disclosures or other information which the Secretary may require or which such person otherwise determines is necessary to administer the plan or to allow the plan to meet such requirements, (ii) registers as a pooled plan provider with the Secretary, and provides such other information to the Secretary as the Secretary may require, before beginning operations as a pooled plan provider, (iii) acknowledges in writing that such person is a named fiduciary (within the meaning of section 402(a)(2) of the Employee Retirement Income Security Act of 1974), and the plan administrator, with respect to the plan, and (iv) is responsible for ensuring that all persons who handle assets of, or who are fiduciaries of, the plan are bonded in accordance with section 412 of the Employee Retirement Income Security Act of 1974. (B) Audits, examinations, and investigations The Secretary may perform audits, examinations, and investigations of pooled plan providers as may be necessary to enforce and carry out the purposes of this subsection. (4) Guidance (A) In general The Secretary shall issue such guidance as the Secretary determines appropriate to carry out this subsection, including guidance— (i) to identify the administrative duties and other actions required to be performed by a pooled plan provider under this subsection, (ii) which describes the procedures to be taken to terminate a plan which fails to meet the requirements to be a plan described in paragraph (1), including the proper treatment of, and actions needed to be taken by, any participating employer of the plan and the assets and liabilities of the plan with respect to employees of that employer, and (iii) identifying appropriate cases to which the rules of paragraph (2)(A) will apply to employers failing to take the actions described in paragraph (1). The Secretary shall take into account under clause (iii) whether the failure of an employer or pooled plan provider to provide any disclosures or other information, or to take any other action, necessary to administer a plan or to allow a plan to meet requirements applicable to the plan under section 401(a) or 408, whichever is applicable, has continued over a period of time that clearly demonstrates a lack of commitment to compliance. (B) Prospective application Any guidance issued by the Secretary under this paragraph shall not apply to any action or failure occurring before the issuance of such guidance. (5) Model plan No later than June 30, 2018, the Secretary shall, in consultation with the Secretary of Labor when appropriate, publish model plan language which meets the requirements of this subsection and of paragraphs (43) and (44) of section 3 of the Employee Retirement Income Security Act of 1974 and which may be adopted in order for a plan to be treated as a plan described in paragraph (1)(B). Such model plans shall also include options under which they can be used by plans that are not pooled employer plans. . (2) Conforming amendment Paragraph (3) of section 413(b) of such Code is amended by striking section 401(a) sections 401(a) and 408(c) (3) Technical amendment Subsection (c) of section 408 of such Code is amended by inserting after paragraph (2) the following new paragraph: (3) There is a separate accounting for any interest of an employee or member (or spouse of an employee or member) in a Roth IRA. . (b) No common interest required for pooled employer plans Section 3(2) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002(2) (C) A pooled employer plan shall be treated as— (i) a single employee pension benefit plan or single pension plan, and (ii) a plan to which section 210(a) applies. . (c) Pooled employer plan and provider defined (1) In general Section 3 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002 (43) Pooled employer plan (A) In general The term pooled employer plan (i) which is an individual account plan established or maintained for the purpose of providing benefits to the employees of two or more employers; (ii) which is a plan described in section 401(a) (iii) the terms of which meet the requirements of subparagraph (B). Such term shall not include a plan with respect to which all of the participating employers have both a common interest other than having adopted the plan and control of the plan. (B) Requirements for plan terms The requirements of this subparagraph are met with respect to any plan if the terms of the plan— (i) designate a pooled plan provider and provide that the pooled plan provider is a named fiduciary of the plan; (ii) designate one or more trustees meeting the requirements of section 408(a)(2) (iii) except as provided in section 404(e), provide that each participating employer retains fiduciary responsibility for— (I) the selection and monitoring in accordance with section 404(a) of the person designated as the pooled plan provider and any other person who, in addition to the pooled plan provider, is designated as a named fiduciary of the plan; and (II) to the extent not otherwise delegated to another fiduciary by the pooled plan provider and subject to the provisions of section 404(c), the investment and management of that portion of the plan’s assets attributable to the employees of that participating employer; (iv) provide that a participating employer, or a participant or beneficiary, is not subject to unreasonable restrictions, fees, or penalties with regard to ceasing participation, receipt of distributions, or otherwise transferring assets of the plan in accordance with section 208 or paragraph (44)(C)(i)(II); (v) require— (I) the pooled plan provider to provide to participating employers any disclosures or other information which the Secretary may require, including, as applicable, any disclosures or other information to facilitate the selection or any monitoring of the pooled plan provider by participating employers; and (II) each participating employer to take such actions as the Secretary or the pooled plan provider determines are necessary to administer the plan or for the plan to meet any requirement applicable under this Act or the Internal Revenue Code of 1986 to a plan described in section 401(a) of such Code or to a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof), whichever is applicable, including providing any disclosures or other information which the Secretary may require or which the pooled plan provider otherwise determines is necessary to administer the plan or to allow the plan to meet such requirements; and (vi) provide that any disclosure or other information required to be provided under clause (v) may be provided in electronic form and will be designed to ensure only reasonable costs are imposed on pooled plan providers and participating employers. (C) Exceptions The term pooled employer plan (i) a multiemployer plan; (ii) a plan established before January 1, 2016, unless the plan administrator elects that the plan will be treated as a pooled employer plan and the plan meets the requirements of this title applicable to a pooled employer plan established on or after such date; and (iii) a plan with respect to which all of the participating employers have both a common interest other than having adopted the plan and control of the plan. (44) Pooled plan provider (A) In general The term pooled plan provider (i) is designated by the terms of a pooled employer plan as a named fiduciary, as the plan administrator, and as the person responsible for the performance of all administrative duties (including conducting proper testing with respect to the plan and employees of each participating employer) which are reasonably necessary to ensure that— (I) the plan meets any requirement applicable under this Act or the Internal Revenue Code of 1986 to a plan described in section 401(a) of such Code or to a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof), whichever is applicable; and (II) each participating employer takes such actions as the Secretary or pooled plan provider determines are necessary for the plan to meet the requirements described in subclause (I), including providing the disclosures and information described in paragraph (43)(B)(v)(II); (ii) registers as a pooled plan provider with the Secretary, and provides to the Secretary such other information as the Secretary may require, before beginning operations as a pooled plan provider; (iii) acknowledges in writing that such person is a named fiduciary, and the plan administrator, with respect to the pooled employer plan; and (iv) is responsible for ensuring that all persons who handle assets of, or who are fiduciaries of, the pooled employer plan are bonded in accordance with section 412. (B) Audits, examinations, and investigations The Secretary may perform audits, examinations, and investigations of pooled plan providers as may be necessary to enforce and carry out the purposes of this paragraph and paragraph (43). (C) Guidance (i) In general The Secretary shall issue such guidance as the Secretary determines appropriate to carry out this paragraph and paragraph (43), including guidance— (I) to identify the administrative duties and other actions required to be performed by a pooled plan provider under either such paragraph; and (II) which requires in appropriate cases that if a participating employer fails to take the actions required under subparagraph (A)(i)(II)— (aa) the assets of the plan attributable to employees of the participating employer are transferred to a plan maintained only by the participating employer (or its successor), to an eligible retirement plan as defined in section 402(c)(8)(B) (bb) the participating employer described in item (aa) (and not the plan with respect to which the failure occurred or any other participating employer in such plan) shall, except to the extent provided in such guidance, be liable for any liabilities with respect to such plan attributable to employees of the participating employer. The Secretary shall take into account under subclause (II) whether the failure of an employer or pooled plan provider to provide any disclosures or other information, or to take any other action, necessary to administer a plan or to allow a plan to meet requirements described in subparagraph (A)(i)(II) has continued over a period of time that clearly demonstrates a lack of commitment to compliance. The Secretary may waive the requirements of subclause (II)(aa) in appropriate circumstances if the Secretary determines it is in the best interests of the employees of the participating employer described in such clause to retain the assets in the plan with respect to which the employer’s failure occurred. (ii) Prospective application Any guidance issued by the Secretary under this subparagraph shall not apply to any action or failure occurring before the issuance of such guidance. (D) Aggregation rules For purposes of this paragraph— (i) In general In determining whether a person meets the requirements of this paragraph to be a pooled plan provider with respect to any plan, all persons who are members of the same controlled group and who perform services for the plan shall be treated as one person. (ii) Members of common group Persons shall be treated as members of the same controlled group if such persons are treated as a single employer under subsection (c) or (d) of section 210. . (2) Bonding requirements for pooled employer plans The last sentence of section 412(a) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1112(a) or in the case of a pooled employer plan (as defined in section 3(43) section 407(d)(1)) (3) Conforming and technical amendments Section 3 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002 (A) in paragraph (16)(B)— (i) by striking or (ii) by striking the period at the end and inserting , or (iv) in the case of a pooled employer plan, the pooled plan provider. (B) by striking the second paragraph (41). (d) Effective date (1) In general The amendments made by this section shall apply to years beginning after December 31, 2019. (2) Rule of construction Nothing in the amendments made by subsection (a) shall be construed as limiting the authority of the Secretary of the Treasury or the Secretary’s delegate (determined without regard to such amendment) to provide for the proper treatment of a failure to meet any requirement applicable under the Internal Revenue Code of 1986 with respect to one employer (and its employees) in a multiple employer plan. 6. Limitation on employer liability Section 404 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1021 (e) (1) An eligible employer (as defined in section 408(p)(2)(C)(i) (A) receives no more than reasonable compensation for its services, as agreed to by the eligible employer, and (B) agrees in the plan document to— (i) comply with all requirements applicable to a pooled plan provider under this title, and (ii) assume, with respect to such eligible employer as agreed to by the eligible employer, all fiduciary responsibility with respect to the plan not retained by the eligible employer, and (C) notifies the eligible employer of its obligations under the pooled employer plan. (2) Notwithstanding paragraph (1), eligible employers participating in such a pooled employer plan shall be responsible for— (A) meeting the enrollment requirements applicable to such employer under the plan, (B) transmitting contributions to the plan in accordance with the terms of the plan, (C) providing such information and assistance as is within the sole control of the eligible employer and is needed by the plan to operate in accordance with the plan document, and (D) providing such other information or assistance in accordance with regulations prescribed by the Secretary. . 7. Portability of lifetime income options (a) In general Subsection (a) of section 401 (38) Portability of lifetime income and managed account options (A) In general A trust forming part of a defined contribution plan shall not be treated as failing to constitute a qualified trust under this section solely by reason of allowing— (i) qualified distributions of a lifetime income investment or a managed account investment, or (ii) distributions of a lifetime income investment in the form of a qualified plan distribution annuity contract, on or after the date that is 90 days prior to the date on which such lifetime income investment or such managed account investment is no longer authorized to be held as an investment option under the plan except as may otherwise be provided by regulations. (B) Definitions For purposes of this subsection— (i) the term qualified distribution (ii) the term lifetime income investment (I) that are not uniformly available with respect to other investment options under the plan, and (II) that are to a lifetime income feature available through a contract or other arrangement offered under the plan or under another eligible retirement plan (as defined in section 402(c)(8)(B)) through a direct trustee-to-trustee transfer to such other eligible retirement plan under section 401(a)(31)(A), (iii) the term lifetime income feature (I) a feature that guarantees a minimum level of income annually (or more frequently) for at least the remainder of the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, or (II) an annuity payable on behalf of the employee under which payments are made in substantially equal periodic payments (not less frequently than annually) over the life of the employee or the joint lives of the employee and the employee’s designated beneficiary, (iv) the term qualified plan distribution annuity contract (v) the term managed account investment (vi) the term account manager (vii) a lifetime income investment or managed account investment is treated as no longer authorized to be held as an investment under the plan if such treatment applies to all plan participants or to a class of such participants, as determined in any reasonable manner. . (b) Cash or deferred arrangement Clause (i) of section 401(k)(2)(B) of such Code is amended by striking or and or (VI) with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subclause must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)), and . (c) Section 403( b (1) Annuity contracts Paragraph (11) of section 403(b) of such Code is amended by striking or , or (D) with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subparagraph must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)). . (2) Custodial accounts Clause (ii) of section 403(b)(7)(A) of such Code is amended to read as follows: (ii) under the custodial account, no such amounts may be paid or made available to any distributee (unless such amount is a distribution to which section 72(t)(2)(G) applies) before— (I) the employee dies, (II) the employee attains age 59½, (III) the employee has a severance from employment, (IV) the employee becomes disabled (within the meaning of section 72(m)(7)), (V) in the case of contributions made pursuant to a salary reduction agreement (within the meaning of section 3121(a)(5)(D)), the employee encounters financial hardship, or (VI) with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subparagraph must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)). . (d) Eligible deferred compensation plans Subparagraph (A) of section 457(d)(1) of such Code is amended by striking or or (iv) with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)) or a managed account investment (as defined in section 401(a)(38)(B)(v)), the date that is 90 days prior to the date that such lifetime income investment or such managed account investment may no longer be held as an investment option under the plan (within the meaning of section 401(a)(38)(B)(vii)), provided that any distribution under this subparagraph must be in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or, in the case of a lifetime income investment, a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)), . (e) Effective date The amendments made by this section shall apply to plan years beginning after December 31, 2017. 8. Increase in credit limitation for small employer pension plan startup costs (a) In general Paragraph (1) of section 45E(b) (1) for the first credit year and each of the 4 taxable years immediately following the first credit year, the greater of— (A) $500, or (B) the lesser of— (i) $250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 414(q)) and who is eligible to participate in the eligible employer plan maintained by the eligible employer, or (ii) $5,000, and . (b) Special rule for employers with 25 or fewer employees Subsection (a) of section 45E of such Code is amended by inserting before the period at the end the following: (100 percent of such costs in the case of an eligible employer with 25 or fewer employees, as determined by substituting 25 100 (c) Automatic contribution plan Paragraph (2) of section 45E(d) of such Code is amended by striking a qualified employer plan within the meaning of section 4972(d) an automatic contribution plan within the meaning of section 414(aa) (d) Conforming change Paragraph (2) of section 45E(d) of such Code is amended by adding at the end thereof the following: For purposes of this section, the term qualified employer plan (e) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2017. 9. Small employer automatic enrollment credit (a) In general Subpart D of part IV of subchapter A of chapter 1 45S. Auto-enrollment credit for retirement savings options provided by small employers (a) In general For purposes of section 38, in the case of an eligible employer, the retirement auto-enrollment credit determined under this section for any taxable year is an amount equal to— (1) $500 for any taxable year occurring during the credit period, and (2) zero for any other taxable year. (b) Credit period For purposes of subsection (a)— (1) In general The credit period with respect to any eligible employer is the 5-taxable-year period beginning with the first taxable year for which the employer adopts an automatic contribution plan (as defined in section 414(aa)), determined without regard to a plan described in section 414(aa)(2)(D) (relating to a grandfathered automatic contribution plan). (2) Maintenance of arrangement No taxable year with respect to an employer shall be treated as occurring within the credit period unless the arrangement described in section 401(k)(14)(C) is included in the plan for such year. (c) Eligible employer For purposes of this section, the term eligible employer . (b) Credit To be part of general business credit Subsection (b) of section 38 plus , plus (37) in the case of an eligible employer (as defined in section 45S(c)), the retirement auto-enrollment credit determined under section 45S(a). . (c) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 Sec. 45S. Auto-enrollment credit for retirement savings options provided by small employers. . (d) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 10. Treatment of automatic contribution plans under State law (a) In general Section 514 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1144 (f) Automatic contribution plans (1) In general If an employer maintains an automatic contribution plan (as defined in section 414(aa) (A) shall not be subject to any requirement imposed by a State or political subdivision thereof to contribute to an individual retirement plan (as defined in section 7701(a)(37) (B) shall not be required to participate in any manner in such a payroll deduction savings program. (2) Qualified State law exception This subsection shall not apply with respect to any employer to the extent that such employer participates in an arrangement under a qualified State law. (3) Qualified State law For purposes of this subsection— (A) In general The term qualified State law (i) was enacted before the date of enactment of the Automatic Retirement Plan Act of 2017 (ii) (I) requires certain employers to contribute to, or participate in, an individual retirement plan (as defined in section 7701(a)(37) of such Code) established and maintained pursuant to a payroll deduction savings program of the State, or (II) allows certain employers to contribute to, or participate in, a plan described in section 413(c) of such Code established and maintained by the State, and (iii) is not superseded by this title (determined without regard to this subsection). (B) Exception If a State law described in subparagraph (A)(ii) is amended after the date of enactment of the Automatic Retirement Plan Act of 2017 . (b) Effective date The amendments made by this section shall apply to plan years beginning after December 31, 2017. 11. Matching payments for elective deferral and IRA contributions by certain individuals (a) In general Subchapter B of chapter 65 6433. Matching payments for elective deferral and IRA contributions by certain individuals (a) In general (1) Allowance of credit Any eligible individual who makes qualified retirement savings contributions for the taxable year shall be allowed a credit for such taxable year in an amount equal to the applicable percentage of so much of the qualified retirement savings contributions made by such eligible individual for the taxable year as does not exceed $1,000. (2) Payment of credit The credit under this section shall be paid by the Secretary as a contribution (as soon as practicable after the eligible individual has filed a tax return for the taxable year) to the applicable retirement vehicle of the eligible individual. (b) Applicable percentage For purposes of this section— (1) In general Except as provided in paragraph (2), the applicable percentage is 50 percent. (2) Phaseout The percentage under paragraph (1) shall be reduced (but not below zero) by the number of percentage points which bears the same ratio to 50 percentage points as— (A) the excess of— (i) the taxpayer’s modified adjusted gross income for such taxable year, over (ii) the applicable dollar amount, bears to (B) the phaseout range. If any reduction determined under this paragraph is not a whole percentage point, such reduction shall be rounded to the next lowest whole percentage point. (3) Applicable dollar amount; phaseout range (A) Joint returns Except as provided in subparagraph (B)— (i) the applicable dollar amount is $65,000, and (ii) the phaseout range is $20,000. (B) Other returns In the case of— (i) a head of a household (as defined in section 2(b)), the applicable dollar amount and the phaseout range shall be ¾ (ii) any taxpayer who is not filing a joint return and who is not a head of a household (as so defined), the applicable dollar amount and the phaseout range shall be ½ (c) Eligible individual For purposes of this section— (1) In general The term eligible individual (2) Dependents and full-time students not eligible The term eligible individual (A) any individual with respect to whom a deduction under section 151 is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins, and (B) any individual who is a student (as defined in section 152(f)(2)). (d) Qualified retirement savings contributions For purposes of this section— (1) In general The term qualified retirement savings contributions (A) the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual, (B) the amount of— (i) any elective deferrals (as defined in section 402(g)(3)) of such individual, and (ii) any elective deferral of compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A), and (C) the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)). Such term shall not include any amount attributable to a payment under subsection (a). (2) Reduction for certain distributions (A) In general The qualified retirement savings contributions determined under paragraph (1) for a taxable year shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph (1) may be made. (B) Testing period For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes— (i) such taxable year, (ii) the 2 preceding taxable years, and (iii) the period after such taxable year and before the due date (including extensions) for filing the return of tax for such taxable year. (C) Excepted distributions There shall not be taken into account under subparagraph (A)— (i) any distribution referred to in section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), (ii) any distribution to which section 408(d)(3) or 408A(d)(3) applies, and (iii) any portion of a distribution if such portion is transferred or paid in a rollover contribution (as defined in section 402(c), 403(a)(4), 403(b)(8), 408A(e), or 457(e)(16)) to an account or plan to which qualified retirement contributions can be made. (D) Treatment of distributions received by spouse of individual For purposes of determining distributions received by an individual under subparagraph (A) for any taxable year, any distribution received by the spouse of such individual shall be treated as received by such individual if such individual and spouse file a joint return for such taxable year and for the taxable year during which the spouse receives the distribution. (e) Applicable retirement savings vehicle (1) In general The term applicable retirement savings vehicle (A) an account or plan elected by the eligible individual under paragraph (2), or (B) if no such election is made, a retirement bond purchased by the Secretary for the benefit of the eligible individual. (2) Other retirement vehicles An eligible individual may elect to have the amount determined under subsection (a) contributed to an account or plan which— (A) is a Roth IRA (as defined in section 408A), or a designated Roth account (within the meaning of section 402A) of an applicable retirement plan (as defined in section 402A(e)(1)), (B) is for the benefit of the eligible individual, (C) accepts contributions made under this section, and (D) is designated by such individual (in such form and manner as the Secretary may provide) on the return of tax for the taxable year. (3) Retirement bond (A) In general For purposes of this section, the term retirement bond chapter 31 (i) provides for interest to be credited at rates that take into account the expected duration of the funds invested in retirement bonds and at rates determined or adjusted in a manner and with sufficient frequency to provide substantial protection from inflation, (ii) is not transferable, and (iii) is designed for investment for retirement. (B) Roth IRA rules applicable The provisions of this title applicable to a Roth IRA, including provisions relating to contributions, holding and distributions, shall apply to a retirement bond, except as determined by the Secretary. (C) Regulations The Secretary may issue such regulations as are necessary to carry out the purposes of this section, including— (i) establishment of procedures to communicate to individuals the importance of investment diversification and the transfer option described in clause (ii), (ii) simplified procedures under which holders of retirement bonds may periodically choose to have the bonds or their proceeds transferred to available Roth IRAs, and (iii) means by which individuals may elect (or be treated as electing) whether to have retirement bonds or their proceeds so transferred. Any such transfer shall be treated as a rollover contribution for purposes of section 408(d)(3) (other than subparagraph (B) thereof). (f) Other definitions and special rules (1) Modified adjusted gross income For purposes of this section, the term modified adjusted gross income (A) determined without regard to sections 911, 931, and 933, and (B) determined without regard to any exclusion or deduction allowed for any qualified retirement savings contribution made during the taxable year. (2) Treatment of contributions In the case of any contribution under subsection (a)(2)— (A) except as otherwise provided in this section or by the Secretary under regulations, such contribution shall be treated in the same manner as a contribution made by the individual on whose behalf such contribution was made, (B) such contribution shall not be treated as income to the taxpayer, and (C) such contribution shall not be taken into account with respect to any applicable limitation under sections 402(g)(1), 403(b), 408(a)(1), 408(b)(2)(B), 408A(c)(2), 414(v)(2), 415(c), or 457(b)(2). (3) Treatment of qualified plans, etc A plan or arrangement to which a contribution is made under this section shall not be treated as violating any requirement under section 401, 403, 408, or 457 solely by reason of accepting such contribution. (4) Erroneous credits If any contribution is erroneously paid under subsection (a)(2), the amount of such erroneous payment shall be treated as an underpayment of tax. (g) Inflation adjustments (1) In general In the case of any taxable year beginning in a calendar year after 2018, each of the dollar amounts in subsections (a)(2) and (b)(3)(A)(i) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2017 calendar year 1992 (2) Rounding Any increase determined under paragraph (1) shall be rounded to the nearest multiple of— (A) $100 in the case of an adjustment of the amount in subsection (a)(2), and (B) $1,000 in the case of an adjustment of the amount in subsection (b)(3)(A)(i). . (b) Promotion and guidance (1) Promotion The Secretary of the Treasury (or the Secretary’s delegate) shall educate taxpayers on the benefits provided under section 6433 (2) Guidance Not later than December 31, 2017, the Secretary of the Treasury (or the Secretary’s delegate) shall issue guidance on the implementation and administration of the amendments made by this section. (c) Payment authority Section 1324(b)(2) of title 31, United States Code, is amended by striking or 6431 6431, or 6433 (d) Deficiencies Section 6211(b)(4) is amended by striking and 6431 6431, and 6433 (e) Conforming amendments (1) Section 25B For payment of credit related to qualified retirement savings contributions, see section 6433. . (2) The table of sections for subchapter B of chapter 65 of such Code is amended by adding at the end the following new item: Sec. 6433. Matching payments for elective deferral and IRA contributions by certain individuals. . (f) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 12. Authority to require reporting (a) Reporting under Internal Revenue Code Subsection (a) of section 6058 The Secretary may by regulation require the inclusion in such annual return of such information as may be necessary or appropriate to determine the effects of the alternative methods of satisfying applicable nondiscrimination requirements, which are described in subsections (k)(13), (k)(14), (m)(11), and (m)(12) of section 401, on the contribution levels of employees who are not highly compensated employees (as defined in section 414(q)). (b) Reporting under employee retirement income security act of 1974 Section 104(a)(2)(A) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1042(a)(2) , except that in the case of such a deferral-only arrangement contained in a pension plan with at least 100 participants, the Secretary may require such reporting as is necessary or appropriate with respect to service providers, investment options, and fees, but not in excess of any reporting applicable to other arrangements.

Summary: Automatic Retirement Plan Act of 2017 This bill amends the Internal Revenue Code to require certain employers to maintain automatic contribution retirement plans for employees. Governments, churches, small employers (10 or fewer employees), certain new businesses, and employers who already maintain certain retirement plans are exempt from the requirement. Automatic contribution retirement plans are defined contribution plans, which must meet specified requirements regarding the eligibility of employees to enroll, automatic enrollment, investments, lifetime income, and fees. The bill also: imposes an excise tax on employers who fail to maintain an automatic contribution plan; increases the dollar limitation for the tax credit for small employer pension plan startup costs; allows a tax credit for small employers who adopt automatic contribution retirement plans; modifies certain nondiscrimination rules that would otherwise apply to the automatic contribution plans; modifies certain fiduciary, qualification, and administrative rules that apply to multiple employer plans; allows states to continue certain programs that require automatic contribution plans; allows a refundable tax credit for certain retirement savings contributions and requires the Department of the Treasury to pay the credit as a contribution to the applicable retirement account; and provides for the portability of lifetime income investment options by permitting a rollover into another retirement plan if the investment is no longer authorized to be held as an investment option under an employer-sponsored plan.