I 
118TH CONGRESS 
2D SESSION 
H. R. 7293 
To amend the Internal Revenue Code of 1986 to provide rules for automatic 
contribution retirement plans and arrangements. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 7, 2024 
Mr. NEAL introduced the following bill; which was referred to the Committee 
on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
rules for automatic contribution retirement plans and 
arrangements. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Automatic IRA Act of 2024’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; table of contents, etc. 
Sec. 2. Automatic contribution plan or arrangement. 
Sec. 3. Credit for certain small employer automatic IRA arrangements. 
Sec. 4. Treatment of automatic IRA arrangements under State law. 
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(c) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this subtitle an 
amendment or repeal is expressed in terms of an amend-
ment to, or repeal of, a section or other provision, the ref-
erence shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986. 
SEC. 2. AUTOMATIC CONTRIBUTION PLAN OR ARRANGE-
MENT. 
(a) AUTOMATIC CONTRIBUTION PLAN OR ARRANGE-
MENT.— 
(1) IN GENERAL.—Section 414 is amended by 
adding at the end the following: 
‘‘(dd) AUTOMATIC CONTRIBUTION PLAN
OR AR-
RANGEMENT.—For purposes of this title— 
‘‘(1) IN GENERAL.—The term ‘automatic con-
tribution plan or arrangement’ means— 
‘‘(A) a defined contribution plan that— 
‘‘(i) is described in clause (i), (ii), or 
(iv) of section 219(g)(5)(A), 
‘‘(ii) includes a qualified cash or de-
ferred arrangement or a salary reduction 
arrangement, and 
‘‘(iii) meets the notice, eligibility, con-
tribution, fee, and lifetime income require-
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ments of paragraphs (2), (3), (4), (6), and 
(7), respectively, 
‘‘(B) an automatic IRA arrangement de-
scribed in paragraph (8), 
‘‘(C) an arrangement described in section 
408(p) that meets the notice, contribution, in-
vestment, and fee requirements described in 
paragraphs (2), (4), (5), (6), respectively, and 
‘‘(D) a plan described in clause (i), (ii), 
(iv), (v), or (vi) of section 219(g)(5)(A) that is 
established and maintained by an employer as 
of the date of enactment of the Automatic IRA 
Act of 2024, or a plan described in section 
219(g)(5)(A)(iv) that is not subject to title I of 
the Employee Retirement Income Security Act 
of 1974 and offers annuity contracts, or makes 
custodial accounts available to employees, as of 
such date. 
‘‘(2) NOTICE REQUIREMENTS.—A plan or ar-
rangement shall be treated as meeting the notice re-
quirements of this paragraph with respect to an em-
ployee if the plan or arrangement meets notice re-
quirements similar to the notice requirements of sec-
tion 401(k)(13)(E). 
‘‘(3) ELIGIBILITY REQUIREMENTS.— 
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‘‘(A) IN GENERAL.—The requirements of 
this paragraph shall be treated as met if all em-
ployees of the employer are eligible to partici-
pate in an automatic contribution plan or ar-
rangement maintained or facilitated by the em-
ployer. 
‘‘(B) CERTAIN
EXCLUSIONS.—The fol-
lowing employees may be excluded from consid-
eration in determining whether the require-
ments of this paragraph are met: 
‘‘(i) INDIVIDUALS
LESS
THAN
YEARS OLD.—Any employee who has not 
attained age 21. 
‘‘(ii) CERTAIN OTHER EMPLOYEES.— 
Any 
employee 
described 
in 
section 
410(b)(3). 
‘‘(iii) SERVICE REQUIREMENTS.—Any 
employee who has completed neither of the 
following periods of service with the em-
ployer maintaining or facilitating the plan 
or arrangement: 
‘‘(I) The period permitted under 
section 410(a)(1) (determined without 
regard to subparagraph (B)(i) there-
of). 
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‘‘(II) A period of 2 consecutive 
12-month periods during each of 
which the employee has at least 500 
hours of service. 
For purposes of subclause (II), 12-month 
periods shall be determined in the same 
manner as under the last sentence of sec-
tion 410(a)(3)(A). 
‘‘(iv) CERTAIN STUDENTS IN CASE OF 
A 403(b) PLANS.—In the case of an annu-
ity contract described in section 403(b), 
employees who are students, but only to 
the extent such employees may be excluded 
under the last sentence of 403(b)(12)(A). 
‘‘(C) SPECIAL
RULES
FOR
CONTROLLED 
GROUPS.—All eligible employees of an employer 
need not be eligible to participate in the same 
automatic contribution plan or arrangement. 
For purposes of this subsection, the term ‘em-
ployer’ shall include all employers treated as a 
single employer under subsection (b), (c), (m), 
or (o) of section 414. 
‘‘(D) ENTRY DATES.—Rules similar to the 
rules of section 410(a)(4) shall apply with re-
spect to employees who have satisfied the age 
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and service requirements referenced in subpara-
graph (B) and who are otherwise entitled to 
participate in a plan or arrangement. 
‘‘(E) AUTOMATIC IRAS FOR NON-EMPLOY-
EES.—The Secretary shall by regulation or 
other guidance provide for making available 
automatic IRAs to individuals who provide serv-
ices that do not constitute employment. 
‘‘(4) CONTRIBUTION REQUIREMENTS.— 
‘‘(A) IN GENERAL.—The requirements of 
this paragraph shall be treated as met if, under 
the plan or arrangement, each employee eligible 
to participate in the plan or arrangement is 
treated as having elected to have the employer 
make elective contributions in an amount equal 
to the qualified percentage of compensation. 
‘‘(B) ELECTION OUT.—The election treat-
ed as having been made under subparagraph 
(A) shall cease to apply with respect to any em-
ployee if such employee makes an affirmative 
election— 
‘‘(i) not to have such contributions 
made, or 
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‘‘(ii) to make elective contributions at 
a level specified in such affirmative elec-
tion. 
‘‘(C) QUALIFIED PERCENTAGE.—For pur-
poses of this paragraph, and except as provided 
in subparagraph (D)(i), the term ‘qualified per-
centage’ means, with respect to any employee, 
any percentage determined under the plan or 
arrangement if such percentage is applied uni-
formly, does not exceed 15 percent (10 percent 
during the period described in clause (i)), and 
is at least— 
‘‘(i) 6 percent during the period be-
ginning on the date on which the first elec-
tive contribution described in subpara-
graph (A) is made with respect to such 
employee and ending on the last day of the 
first plan year which begins after such 
date, 
‘‘(ii) 7 percent during the first plan 
year following the plan year described in 
clause (i), 
‘‘(iii) 8 percent during the first plan 
year following the plan year described in 
clause (ii), 
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‘‘(iv) 9 percent during the first plan 
year following the plan year described in 
clause (iii), and 
‘‘(v) 10 percent during any subse-
quent plan year. 
‘‘(D) RULES
RELATING
TO
AUTOMATIC 
IRA ARRANGEMENTS.—For purposes of this 
paragraph— 
‘‘(i) 
QUALIFIED
PERCENTAGE.—In 
the case of an automatic IRA arrange-
ment, the term ‘qualified percentage’ 
means, with respect to an employee for any 
taxable year, a percentage equal to the 
minimum percentage described for the tax-
able year under subparagraph (C) deter-
mined by substituting ‘taxable year of the 
employee’ for ‘the plan year’ each place it 
appears. 
‘‘(ii) PAYROLL DEDUCTION CONTRIBU-
TIONS.—In the case of an automatic IRA 
arrangement, any reference in this para-
graph to elective contributions shall be 
treated as including a reference to payroll 
deduction contributions. 
‘‘(5) INVESTMENT REQUIREMENTS.— 
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‘‘(A) IN GENERAL.— 
‘‘(i) DEFAULT INVESTMENTS.—A plan 
or arrangement shall be treated as meeting 
the requirements of this paragraph if in 
the absence of an investment election by a 
participant or beneficiary, amounts are in-
vested only in the class of assets or funds 
described in subparagraph (B). 
‘‘(ii) REQUIRED
INVESTMENT
OP-
TIONS
IN
AUTOMATIC
IRA
ARRANGE-
MENT.—In addition to the default invest-
ment requirement of clause (i), an auto-
matic IRA arrangement shall be treated as 
meeting the requirements of this para-
graph if the arrangement provides the op-
tion of investing in each of the classes of 
assets or funds described in subparagraphs 
(B), (C), (D), and (E), and no other in-
vestment options. 
‘‘(B) TARGET DATE/LIFECYCLE OPTION.— 
The class of assets or funds described in this 
clause is the class of assets or funds that con-
stitutes an investment fund product or model 
portfolio described in Department of Labor reg-
ulation section 2550.404c–5(e)(4)(i). 
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‘‘(C) 
PRINCIPAL
PRESERVATION.—The 
class of assets or funds described in this clause 
is the class of assets or funds that is designed 
to protect the principal of the individual on an 
ongoing basis. 
‘‘(D) BALANCED
OPTION.—The class of 
assets or funds described in this clause is the 
class of assets or funds that constitutes a quali-
fied default investment alternative under De-
partment 
of 
Labor 
regulation 
section 
2550.404c–5(e)(4)(ii). 
‘‘(E) OTHER.—Any other class of assets or 
funds determined by the Secretary to be a 
qualified investment for purposes of this sec-
tion. 
‘‘(6) FEE REQUIREMENTS.—In the case of any 
plan or arrangement not otherwise subject to title I 
of the Employee Retirement Income Security Act of 
1974, under the fee requirements of this paragraph, 
no participant, beneficiary, employer, individual re-
tirement account, plan, or arrangement may be 
charged unreasonable fees or expenses. 
‘‘(7) LIFETIME INCOME REQUIREMENTS.— 
‘‘(A) IN GENERAL.—Except in the case of 
a plan maintained by an eligible employer (as 
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defined in section 408(p)(2)(C)(i)), a plan or 
arrangement shall be treated as meeting the 
lifetime income requirement described in this 
paragraph if the plan or arrangement permits 
participants to elect to receive at least 50 per-
cent of their vested account balance in a form 
of 
distribution 
described 
in 
section 
401(a)(38)(B)(iii). 
‘‘(B) EXCEPTION.— 
‘‘(i) IN
GENERAL.—This paragraph 
shall not apply with respect to any partici-
pant whose vested account balance is 
$200,000 or less at the time of distribu-
tion. 
‘‘(ii) NOT TREATED AS DISCRIMINA-
TORY IN FAVOR OF HIGHLY COMPENSATED 
EMPLOYEES.—A plan shall not be treated 
as failing to meet the requirements of sec-
tion 401(a)(4) solely by reason of applying 
the exception of clause (i) to the require-
ments of subparagraph (A). 
‘‘(8) AUTOMATIC IRA ARRANGEMENT.— 
‘‘(A) IN GENERAL.—For purposes of this 
paragraph, the term ‘automatic IRA arrange-
ment’ means, with respect to an employer (and 
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‘‘(B) ADMINISTRATIVE REQUIREMENTS.— 
‘‘(i) PAYMENTS.—The requirements of 
this paragraph shall not be treated as met 
with respect to any automatic IRA ar-
rangement unless the employer makes the 
payments elected or treated as elected 
under subparagraph (A)(i) on or before the 
last day of the month following the month 
in which the compensation otherwise would 
have been payable to the employee in cash. 
‘‘(ii) NOTICE OF ELECTION PERIOD.— 
The requirements of this paragraph shall 
not be treated as met with respect to any 
year unless the employer notifies each em-
ployee eligible to participate, within a rea-
sonable period of time before the beginning 
of such year (and, for the first year the 
employee is so eligible, a reasonable period 
of time before the first day such employee 
is so eligible), of— 
‘‘(I) the opportunity to elect to 
have contributions made, or to be 
treated as so electing, under clause 
(i)(I), or (ii), of subparagraph (A), 
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‘‘(II) the opportunity to elect not 
to have payroll deduction contribu-
tions made or to have such contribu-
tions made at a different percentage 
or in a different amount, and 
‘‘(III) the opportunity under sub-
paragraph (A)(iii) to modify the man-
ner in which such amounts are in-
vested for such year. 
The employer shall provide such notice in 
paper form or, if the employee so elects, in 
electronic form. 
‘‘(C) ELIGIBILITY REQUIREMENTS.— 
‘‘(i) IN GENERAL.—The requirements 
of this paragraph shall not be treated as 
met with respect to an automatic IRA ar-
rangement facilitated by the employer un-
less all employees of the employer are eligi-
ble to participate in the arrangement. 
‘‘(ii) CERTAIN EXCLUSIONS.—The fol-
lowing employees may be excluded from 
consideration in determining whether the 
requirements of this paragraph are met: 
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‘‘(I) INDIVIDUALS LESS THAN 18 
YEARS OLD.—Any employee who has 
not attained age 18. 
‘‘(II) CERTAIN OTHER EMPLOY-
EES.—Any employee described in sec-
tion 410(b)(3). 
‘‘(III) 
SERVICE
REQUIRE-
MENTS.—Any employee who has not 
completed at least 3 months of service 
with the employer facilitating the ar-
rangement. 
‘‘(iii) SPECIAL
RULES
FOR
CON-
TROLLED GROUPS.—For purposes of this 
subparagraph, all eligible employees of an 
employer need not be eligible to participate 
in the same arrangement. For purposes of 
this clause, the term ‘employer’ shall in-
clude all employers treated as a single em-
ployer under subsection (b), (c), (m), or 
(o) of section 414. 
‘‘(iv) AUTOMATIC IRAS FOR NON-EM-
PLOYEES.—The Secretary shall by regula-
tion or other guidance provide for making 
available automatic IRAs to individuals 
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who provide services that do not constitute 
employment. 
‘‘(D) LIMITS
ON
CONTRIBUTIONS.—An 
employer shall not be treated as failing to sat-
isfy the requirements of this section or any 
other provision of this title merely because— 
‘‘(i) aggregate payroll deduction con-
tributions by or on behalf of an individual 
to individual retirement accounts of the in-
dividual exceed the deductible amount in 
effect under section 219(b)(5) (determined 
without regard to subparagraph (B) there-
of) for any taxable year in which any pay-
roll deduction contributions by the em-
ployer under an automatic IRA arrange-
ment are made, or 
‘‘(ii) the employer chooses to limit the 
payroll deduction contributions under this 
subsection on behalf of an employee for 
any calendar year in a manner reasonably 
designed to avoid exceeding such deduct-
ible amount. 
‘‘(E) DEFAULT
TREATMENT
AS
ROTH 
IRA.—An employee on whose behalf payroll de-
duction contributions are made to an individual 
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retirement account under subparagraph (A) 
may elect, at such time and in such manner 
and form as the Secretary may prescribe, 
whether to treat the individual retirement ac-
count as designated as a Roth IRA. If no such 
election is made, the account shall be treated as 
designated as a Roth IRA. 
‘‘(F) DEPOSITS
TO
INDIVIDUAL
RETIRE-
MENT ACCOUNTS OF A DESIGNATED TRUSTEE 
OR ISSUER.— 
‘‘(i) IN GENERAL.—An employer shall 
not be treated as failing to satisfy the re-
quirements of this section, or any other 
provision of this title, merely because the 
employer makes all payroll deduction con-
tributions on behalf of all employees (or all 
employees who do not specify an individual 
retirement account, trustee, or issuer to re-
ceive the contributions) to individual retire-
ment accounts specified in clause (ii). 
‘‘(ii) INDIVIDUAL
RETIREMENT
AC-
COUNTS
OTHER
THAN
THOSE
SELECTED 
BY EMPLOYEE.— 
‘‘(I) IN GENERAL.—An employer 
may elect to have payroll deduction 
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contributions for all employees partici-
pating in an automatic IRA arrange-
ment made to individual retirement 
accounts of a trustee or issuer under 
the arrangement that has been des-
ignated by the employer, but only if 
the provider of such accounts, and the 
investments therein, are identified on 
the website established under sub-
paragraph (G)(iii). 
‘‘(II) 
NOTICE.—Subclause 
(I) 
shall not apply unless each participant 
is notified in writing that the partici-
pant may direct the participant’s bal-
ance be transferred without cost or 
penalty to another individual retire-
ment account established by or on be-
half of the participant. Such notice 
shall be in paper form or, if the em-
ployee so elects, electronic form. 
‘‘(iii) EMPLOYERS
MAY
PERMIT
EM-
PLOYEE TO CHOOSE IRA.—If the employer 
so elects, the arrangement may provide for 
an employee election to have payroll deduc-
tion contributions made to any individual 
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retirement account specified by the em-
ployee. 
‘‘(iv) REGULATIONS.—The Secretary 
may issue such regulations as are nec-
essary to carry out the purposes of this 
subparagraph, including establishment of 
procedures to assist employers and individ-
uals in connecting with certified and avail-
able providers of individual retirement ac-
counts and to communicate to individuals 
the importance of investment diversifica-
tion. 
‘‘(G) MODEL NOTICE, ETC.—The Secretary 
shall— 
‘‘(i) provide a model notice, written in 
a manner calculated to be understandable 
to the average worker, that is simple to 
use— 
‘‘(I) to notify employees of the 
requirement under this section for the 
employer to provide certain employees 
with the opportunity to participate in 
an automatic IRA arrangement, and 
‘‘(II) to satisfy the requirements 
of subparagraph (B)(ii), 
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‘‘(ii) provide model forms for enroll-
ment, including automatic enrollment, in 
an automatic IRA arrangement, 
‘‘(iii) establish a website or other elec-
tronic means that small employers and in-
dividuals can access and use to obtain in-
formation on automatic IRA arrangements 
(including clear, standardized, easy-to-com-
pare information on fees and expenses, in-
vestment options and returns, and defaults 
in a format prescribed by the Secretary) 
and to obtain notices and forms, and 
‘‘(iv) establish a process— 
‘‘(I) for the provider of an auto-
matic IRA arrangement to dem-
onstrate to the Secretary that the ar-
rangement is described in this para-
graph and meets the requirements 
specified in paragraph (1)(B), and 
‘‘(II) to certify any arrangement 
that the Secretary determines so dem-
onstrates, to regularly monitor compli-
ance and update such determinations 
and certifications, and to list all ar-
rangements so certified on the website 
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described in clause (iii) as appropriate 
for use by employers and participants. 
The information referred to in clause (iii) shall 
be provided in a manner designed to assist em-
ployers and providers by facilitating the identi-
fication by employers of private-sector providers 
of individual retirement accounts, including the 
provider’s investment options, that are appro-
priate for use in automatic IRA arrangements. 
‘‘(H) CERTAIN
STATE-BASED
ARRANGE-
MENTS.—An arrangement facilitated by an em-
ployer shall not fail to be treated as an auto-
matic IRA arrangement merely because such 
arrangement is required, provided for, facili-
tated, or otherwise offered, in whole or in part, 
by a State (or a political subdivision, agency, or 
instrumentality thereof). 
‘‘(I) 
INDIVIDUAL
RETIREMENT
AC-
COUNT.—For purposes of this paragraph, the 
term ‘individual retirement account’ shall have 
the meaning given such term by section 408(a), 
except that such term shall include individual 
retirement annuities (as defined in section 
408(b)).’’. 
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(2) OTHER RULES APPLICABLE TO AUTOMATIC 
IRA ARRANGEMENTS.— 
(A) PENALTY
FOR
FAILURE
TO
TIMELY 
REMIT CONTRIBUTIONS TO AUTOMATIC IRA AR-
RANGEMENTS.—Section 4975(c) is amended by 
adding at the end the following new paragraph: 
‘‘(7) SPECIAL RULE FOR AUTOMATIC IRA AR-
RANGEMENTS.—For purposes of paragraph (1), if 
an employer is required under an automatic IRA ar-
rangement (as defined in section 414(dd)(1)(B)) to 
deposit amounts withheld from an employee’s com-
pensation into an individual retirement account 
(within the meaning of section 414(dd)(8)(I)) but 
fails to do so within the time prescribed under sec-
tion 414(dd)(8)(B)(i), such amounts shall be treated 
as assets of the individual retirement account.’’. 
(B) WAIVER OF EARLY WITHDRAWAL PEN-
ALTY FOR CERTAIN DISTRIBUTIONS FOLLOWING 
INITIAL ELECTION TO PARTICIPATE IN AUTO-
MATIC
IRA
ARRANGEMENT.—Section 72(t) is 
amended by adding at the end the following 
new paragraph: 
‘‘(11) 
DISTRIBUTION
FOLLOWING
INITIAL 
ELECTION TO PARTICIPATE IN AUTOMATIC IRA AR-
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RANGEMENT.—Paragraph (1) shall not apply in the 
case of a distribution— 
‘‘(A) to an individual from an individual 
retirement account (within the meaning of sec-
tion 414(dd)(8)(I)) that is part of an automatic 
IRA arrangement (as defined in section 
414(dd)(8)(A)), and 
‘‘(B) made not later than 90 days after the 
individual is first treated under clause (ii) of 
section 414(dd)(8)(A) as having made an elec-
tion under clause (i)(I) of such section.’’. 
(C) AUTOMATIC IRA ADVISORY GROUP.— 
(i) IN GENERAL.—Not later than 90 
days after the date of the enactment of 
this Act, the Secretary of the Treasury 
shall establish an Automatic IRA Advisory 
Group (hereinafter in this subparagraph 
referred to as the ‘‘Advisory Group’’). The 
purpose of the Advisory Group shall be to 
make recommendations, advise, and assist 
in the Secretary’s implementation and ad-
ministration of paragraphs (5), (6), and 
(8) of section 414(dd) of the Internal Rev-
enue Code of 1986 with respect to auto-
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matic IRA arrangements in the best finan-
cial interest of savers, including— 
(I) the procedures and criteria 
for the periodic certification, website 
listing, and monitoring of arrange-
ments and investment options that 
meet the requirements of those para-
graphs, 
(II) user-friendly disclosure re-
garding investment returns and risks, 
terms, fees, and expenses to facilitate 
comparison, 
(III) the use of low-cost invest-
ment options, 
(IV) the appropriate use of elec-
tronic and paper methods to provide 
notice and disclosure, 
(V) any possible learnings or effi-
ciencies based on the Secretary’s pro-
cedures and experience in approving 
nonbank individual retirement account 
trustees, and 
(VI) such other related matters 
as may be determined by the Sec-
retary. 
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(ii) 
MEMBERSHIP.—The 
Advisory 
Group shall consist of not more than 15 
members and shall be composed of— 
(I) such individuals as the Sec-
retary may consider appropriate to 
provide expertise regarding the finan-
cial needs and challenges of lower- 
and middle-income households, 
(II) at least one individual who is 
an expert in retirement-related con-
sumer protections or who represents 
the general public, and 
(III) at least one representative 
of the Department of the Treasury. 
(iii) COMPENSATION.—The members 
of the Advisory Group shall serve without 
compensation. 
(iv) ADMINISTRATIVE SUPPORT.—The 
Department of the Treasury shall provide 
appropriate administrative support to the 
Advisory Group, including technical assist-
ance. The Advisory Group may use the 
services and facilities of such Department, 
with or without reimbursement, as deter-
mined by such Department. 
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(v) REPORT BY ADVISORY GROUP.— 
Not later than 1 year after the date of the 
enactment of this Act, the Advisory Group 
shall submit to the Secretary of the Treas-
ury a report containing its recommenda-
tions. The Secretary may request that the 
Advisory Group submit subsequent reports. 
(3) CONFORMING
AMENDMENT
RELATING
TO 
QUALIFIED CASH OR DEFERRED ARRANGEMENTS.— 
Section 401(k)(15)(B)(i) is amended by inserting 
‘‘or section 414(dd)(3)(B)(iii)(II)’’ after ‘‘paragraph 
(2)(D)(ii)’’ in the matter preceding subclause (I) 
thereof. 
(b) EXCISE TAX FOR FAILURE TO MAINTAIN OR FA-
CILITATE AUTOMATIC CONTRIBUTION PLANS
OR AR-
RANGEMENTS.— 
(1) IN GENERAL.—Chapter 43 is amended by 
adding at the end the following new section: 
‘‘SEC. 4980J. FAILURE TO MAINTAIN OR FACILITATE AUTO-
MATIC CONTRIBUTION PLANS OR ARRANGE-
MENTS. 
‘‘(a) GENERAL RULE.— 
‘‘(1) IN GENERAL.—There is hereby imposed a 
tax on the failure of an employer to maintain or fa-
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cilitate an automatic contribution plan or arrange-
ment. 
‘‘(2) EXCEPTION FOR ARRANGEMENTS UNDER 
QUALIFIED STATE LAW.—Paragraph (1) shall not 
apply to an employer to the extent such employer fa-
cilitates an arrangement described in subsection 
(f)(3)(B) under a qualified State law. 
‘‘(b) AMOUNT OF TAX.— 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect 
to an employee shall be $10 for each day in the non-
compliance period with respect to such failure. 
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 
of this section, the term ‘noncompliance period’ 
means, with respect to any failure, the 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 eli-
gible to participate in an automatic con-
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tribution plan or arrangement maintained 
or facilitated by such employer. 
‘‘(3) ADJUSTMENT FOR INFLATION.— 
‘‘(A) IN
GENERAL.—In the case of any 
failure relating to maintaining or facilitating a 
plan or arrangement in a calendar year begin-
ning after 2026, the $10 amount under para-
graph (1) shall be increased by an amount 
equal to such dollar amount multiplied by the 
cost-of-living adjustment determined under sec-
tion 1(f)(3) for the calendar year determined by 
substituting ‘calendar year 2025’ for ‘calendar 
year 2016’ in subparagraph (A)(ii) thereof. 
‘‘(B) ROUNDING.—If any amount adjusted 
under subparagraph (A) is not a whole dollar 
amount, such amount shall be rounded to the 
nearest whole dollar amount. 
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.— 
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT 
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed by subsection (a) 
on any failure during any period for which it is es-
tablished to the satisfaction of the Secretary that 
none of the persons referred to in subsection (e) 
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knew, nor exercising reasonable diligence would have 
known, that such failure existed. 
‘‘(2) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 91⁄2 MONTHS.—No tax shall be im-
posed 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 
91⁄2-month period beginning on the first date 
any of the persons referred to in subsection (e) 
knew that such failure existed, or exercising 
reasonable diligence would have known. 
‘‘(3) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—In the case of failures which 
are due to reasonable cause and not to willful ne-
glect— 
‘‘(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 
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