I 
110TH CONGRESS 
1ST SESSION H. R. 2167 
To amend the Internal Revenue Code of 1986 to allow employees not covered 
by qualified retirement plans to save for retirement through automatic 
payroll deposit IRAs, to facilitate similar saving by the self-employed, 
and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 3, 2007 
Mr. NEAL of Massachusetts (for himself, Mr. ENGLISH of Pennsylvania, Mr. 
EMANUEL, Mr. LARSON of Connecticut, and Ms. SCHWARTZ) introduced 
the following bill; which was referred to the Committee on Ways and 
Means, and in addition to the Committee on Education and Labor, for 
a period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the com-
mittee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to allow em-
ployees not covered by qualified retirement plans to save 
for retirement through automatic payroll deposit IRAs, 
to facilitate similar saving by the self-employed, and for 
other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Automatic IRA Act 
of 2007’’. 
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SEC. 2. EMPLOYEES NOT COVERED BY QUALIFIED RETIRE-
MENT PLANS OR ARRANGEMENTS ENTITLED 
TO PARTICIPATE IN PAYROLL DEPOSIT IRA 
ARRANGEMENTS. 
(a) IN GENERAL.—Subpart A of part I of subchapter 
A of chapter 1 of the Internal Revenue Code of 1986 (re-
lating to pension, profit-sharing, stock bonus plans, etc.) 
is amended by inserting after section 408A the following 
new section: 
‘‘SEC. 408B. RIGHT TO PAYROLL DEPOSIT IRA ARRANGE-
MENTS AT WORK. 
‘‘(a) REQUIREMENT TO PROVIDE PAYROLL DEPOSIT 
IRA ARRANGEMENT.—Each employer (other than an em-
ployer described in subsection (e)) shall provide to each 
applicable employee of the employer for any calendar year 
the opportunity to participate in a payroll deposit IRA ar-
rangement which meets the requirements of this section. 
‘‘(b) PAYROLL DEPOSIT IRA ARRANGEMENT.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘payroll deposit 
IRA arrangement’ means a written arrangement of 
an employer— 
‘‘(A) under which an applicable employee 
eligible to participate in the arrangement may 
elect to contribute to an individual retirement 
plan established by or on behalf of the employee 
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by having the employer make periodic direct de-
posit or other payroll deposit payments (includ-
ing electronic payments) to the plan by payroll 
deduction, and 
‘‘(B) which meets the requirements of 
paragraph (2). 
‘‘(2) ADMINISTRATIVE
REQUIREMENTS.—The 
requirements of this paragraph are met with respect 
to any payroll deposit IRA arrangement if— 
‘‘(A) the employer must make the pay-
ments elected under paragraph (1)(A) on or be-
fore the later of— 
‘‘(i) the due date for the deposit of 
tax required to be deducted and withheld 
under chapter 24 (relating to collection of 
income tax at source on wages) for the 
payroll period to which such payments re-
late, or 
‘‘(ii) the 30th day following the last 
day of the month with respect to which the 
payments are to be made, 
‘‘(B) subject to a requirement for reason-
able notice, an employee may elect to terminate 
participation in the arrangement at any time 
during a calendar year, except that if an em-
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ployee so terminates, the arrangement may pro-
vide that the employee may not elect to resume 
participation until the beginning of the next cal-
endar year, 
‘‘(C) each employee eligible to participate 
may elect, during the 60-day period or other pe-
riod specified by the Secretary before the begin-
ning of any calendar year (and during the 60- 
day period or other period specified by the Sec-
retary before the first day the employee is eligi-
ble to participate), to participate in the ar-
rangement, or to modify the employee’s election 
under the arrangement (including the amounts 
subject to the arrangement and the manner in 
which such amounts are invested), for such 
year, 
‘‘(D) the employer provides— 
‘‘(i) immediately before the beginning 
of each period described in subparagraph 
(C), a notice to each employee of the em-
ployee’s opportunity to make the election 
and the maximum amount which may be 
contributed to an individual retirement 
plan on an annual basis, and 
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‘‘(ii) if the arrangement includes an 
automatic enrollment arrangement, the no-
tices required under subsection (h) with re-
spect to the automatic enrollment arrange-
ment, 
‘‘(E) subject to subsection (f), the arrange-
ment provides that an employee may elect to 
have contributions made to any individual re-
tirement plan specified by the employee, and 
‘‘(F) if the arrangement does not include 
an automatic enrollment arrangement— 
‘‘(i) the arrangement requires the em-
ployer to take all reasonable actions to so-
licit from all employees eligible to partici-
pate in the arrangement an explicit elec-
tion to either participate or not to partici-
pate in the arrangement, and 
‘‘(ii) the arrangement provides that if 
an employee fails to make an explicit elec-
tion under clause (i) within the time pre-
scribed under the arrangement, the em-
ployee will be treated as having made an 
election to participate in the arrangement 
(and amounts shall be invested on behalf 
of the participant) in the same manner as 
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if the arrangement had included an auto-
matic enrollment arrangement under sub-
section (g). 
‘‘(c) APPLICABLE EMPLOYEE DEFINED; RELATED 
DEFINITIONS AND RULES.—For purposes of this sec-
tion— 
‘‘(1) APPLICABLE EMPLOYEE.— 
‘‘(A) IN GENERAL.—The term ‘applicable 
employee’ means, with respect to any calendar 
year, any employee— 
‘‘(i) who was not eligible under a 
qualified plan or arrangement maintained 
by the employer for service for the pre-
ceding calendar year, and 
‘‘(ii) with respect to whom it is rea-
sonable to expect that the employee will 
not be eligible during the calendar year 
under such a qualified plan or arrange-
ment. 
‘‘(B) SPECIAL
RULES.—For purposes of 
subparagraph (A)(i)— 
‘‘(i) ELIGIBILITY.—An employee shall 
be treated as eligible under a plan for a 
preceding calendar year if, as of the last 
day of the last plan year ending in the pre-
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ceding calendar year, the employee has sat-
isfied the plan’s eligibility requirements. 
‘‘(ii) EXCLUDED PLANS.—A qualified 
plan or arrangement shall not be taken 
into account under this paragraph if— 
‘‘(I) the plan or arrangement is 
frozen as of the first day of the pre-
ceding calendar year, or 
‘‘(II) in the case of a plan or ar-
rangement under which the only con-
tributions are discretionary on the 
part of the sponsor, there has not 
been an employer contribution made 
to the plan or arrangement for the 2- 
plan-year period ending with the last 
plan year ending in the second pre-
ceding calendar year and it is not rea-
sonable to assume that an employer 
contribution will be made for the plan 
year ending in the preceding calendar 
year. 
‘‘(2) EXCLUDABLE EMPLOYEES.—An employer 
may elect to exclude from treatment as applicable 
employees under paragraph (1)— 
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‘‘(A) 
employees 
described 
in 
section 
410(b)(3), 
‘‘(B) employees who have not attained the 
age of 18 before the beginning of the calendar 
year, 
‘‘(C) employees who have not completed at 
least 3 months of service with the employer, 
‘‘(D) in the case of an employer that main-
tains a qualified plan or arrangement which 
generally excludes employees who have not sat-
isfied the eligibility requirements described in 
section 410(a)(1)(A) (without regard to section 
410(a)(1)(B)), employees who have not yet sat-
isfied such requirements, 
‘‘(E) employees who are eligible to make 
salary reduction contributions under an ar-
rangement which meets the requirements of 
section 403(b), and 
‘‘(F) all employees of the employer if the 
employer maintains an arrangement described 
in section 408(p). 
‘‘(3) QUALIFIED
PLAN
OR
ARRANGEMENT.— 
The term ‘qualified plan or arrangement’ means a 
plan, contract, pension, or trust described in section 
219(g)(5). 
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‘‘(4) EXCEPTION FOR EMPLOYEES OF GOVERN-
MENTS AND CHURCHES.—The term ‘applicable em-
ployee’ shall not include an employee of— 
‘‘(A) a government or entity described in 
section 414(d), or 
‘‘(B) a church or a convention or associa-
tion of churches which is exempt from tax 
under section 501, including any employee de-
scribed in section 414(e)(3)(B). 
‘‘(5) DESIGNATION
OF
APPLICABLE
EMPLOY-
EES.—The Secretary shall issue guidelines for deter-
mining the class or classes of employees to be cov-
ered by a payroll deposit IRA arrangement. Such 
guidelines shall provide that if an employer elects 
under paragraph (2) to exclude employees from the 
arrangement, the employer shall specify the classi-
fication or categories of employees who are not so 
covered. 
‘‘(d) PAYROLL
DEPOSIT
IRA CONTRIBUTIONS 
TREATED LIKE OTHER CONTRIBUTIONS TO INDIVIDUAL 
RETIREMENT PLANS.— 
‘‘(1) TAX TREATMENT UNAFFECTED.—The fact 
that a contribution to an individual retirement plan 
is made on behalf of an employee under a payroll de-
posit IRA arrangement instead of being made di-
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rectly by the employee shall not affect the deduct-
ibility or other tax treatment of the contribution or 
of other amounts under this title. 
‘‘(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN 
INTO ACCOUNT.—Any contribution made on behalf 
of an employee under a payroll deposit IRA arrange-
ment shall be taken into account in applying the lim-
itations on contributions to individual retirement 
plans and the other provisions of this title applicable 
to individual retirement plans as if the contribution 
had been made directly by the employee. 
‘‘(e) EXCEPTION FOR CERTAIN SMALL AND NEW 
EMPLOYERS.— 
‘‘(1) IN GENERAL.—The requirements of this 
section shall not apply for any calendar year to an 
employer if— 
‘‘(A) the employer did not have more than 
10 employees who received at least $5,000 of 
compensation from the employer for the pre-
ceding calendar year, or 
‘‘(B) was not in existence at all times dur-
ing the 2 preceding calendar years and did not 
have more than 100 employees who received at 
least $5,000 of compensation from the employer 
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on any day during either of the 2 preceding cal-
endar years. 
‘‘(2) OPERATING RULES.—In determining the 
number of employees for purposes of this sub-
section— 
‘‘(A) any rule applicable in determining the 
number of employees for purposes of section 
408(p)(2)(C) shall be applicable under this sub-
section, 
‘‘(B) all members of the same family 
(within the meaning of section 318(a)(1)) shall 
be treated as 1 individual, and 
‘‘(C) any reference to an employer shall in-
clude a reference to any predecessor employer. 
‘‘(f) DEPOSITS TO INDIVIDUAL RETIREMENT PLANS 
OTHER THAN THOSE SELECTED BY EMPLOYEE.— 
‘‘(1) IN GENERAL.—An employer shall not be 
treated as failing to satisfy the requirements of this 
section or any other provision of this title merely be-
cause the employer makes all contributions (or all 
contributions on behalf of employees who do not 
specify an individual retirement plan, trustee, or 
issuer to receive the contributions) to individual re-
tirement plans specified in paragraph (2) or (4). 
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‘‘(2) PLANS OF A DESIGNATED TRUSTEE OR 
ISSUER.—An employer may elect to have contribu-
tions for all applicable employees participating in a 
payroll deposit IRA arrangement made to individual 
retirement plans of a designated trustee or issuer 
under the arrangement. The preceding sentence 
shall not apply unless each participant is notified in 
writing that the participant’s balance may be trans-
ferred without cost or penalty to another individual 
retirement plan established by or on behalf of the 
participant. 
‘‘(3) PAYROLL TAX DEPOSIT PROCEDURE.—The 
Secretary, in consultation with the TSP II Board, 
shall establish a procedure under which an em-
ployer— 
‘‘(A) may include with each deposit of tax 
required to be deducted and withheld under 
chapter 24 the aggregate amounts, for the pe-
riod covered by the deposit, which applicable 
employees have designated under subsection 
(b)(1)(A) (or are deemed to have designated 
under subsection (b)(2)(F)(ii) or under an auto-
matic enrollment arrangement described in sub-
section (g)) for contribution to individual retire-
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