under principles similar to the principles of sec-
tion 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 rel-
ative to the failure involved. 
‘‘(d) TAX NOT TO APPLY IN CERTAIN CASES.—This 
section shall not apply in the case of— 
‘‘(1) any employer that employed no more than 
10 employees each of whom received at least $5,000 
of compensation from the employer during the prior 
calendar year, 
‘‘(2) any employer with respect to a govern-
mental plan (within the meaning of section 414(d)), 
‘‘(3) any employer with respect to a church plan 
(within the meaning of section 414(e)), or 
‘‘(4) any employer that has been in existence 
for fewer than 2 years, taking into account all pred-
ecessor employers. 
‘‘(e) LIABILITY FOR TAX.—The employer shall be lia-
ble 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 
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other employer with which they are aggregated under sub-
section (f)(2). 
‘‘(f) DEFINITIONS.—For purposes of this section— 
‘‘(1) AUTOMATIC CONTRIBUTION PLAN OR AR-
RANGEMENT.—The term ‘automatic contribution 
plan or arrangement’ has the meaning given such 
term under section 414(dd), and 
‘‘(2) EMPLOYER.—The term ‘employer’ includes 
all employers treated as a single employer under 
subsection (b), (c), (m), or (o) of section 414. 
‘‘(3) QUALIFIED STATE LAW.—The term ‘quali-
fied State law’ means a State law (as it may be 
amended from time to time) that— 
‘‘(A) was enacted before January 1, 2027, 
and 
‘‘(B) requires certain employers to facili-
tate an automatic IRA arrangement pursuant 
to a payroll deduction savings program of the 
State.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 43 is amended by adding at the 
end the following new item: 
‘‘Sec. 4980J. Failure to maintain or facilitate automatic contribution plans or 
arrangements.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2026. 
SEC. 3. CREDIT FOR CERTAIN SMALL EMPLOYER AUTO-
MATIC IRA ARRANGEMENTS. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by adding at the end 
the following new section: 
‘‘SEC. 45BB. CREDIT FOR CERTAIN SMALL EMPLOYER 
AUTOMATIC IRA ARRANGEMENTS. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of an eligible employer, the small employer 
automatic IRA arrangement credit determined under this 
section for any taxable year in the credit period is $500. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE EMPLOYER.—The term ‘eligible 
employer’ means, with respect to the calendar year 
in which the taxable year begins, an employer 
which— 
‘‘(A)(i) facilitates an automatic IRA ar-
rangement (as defined in section 414(dd)(8)), 
or an arrangement described in 4980J(a)(2), 
and 
‘‘(ii) is described in 408(p)(2)(C)(i), and 
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‘‘(B) did not maintain an eligible employer 
plan during the portion of the calendar year 
preceding the commencement of such arrange-
ment and the 2 preceding calendar years. 
‘‘(2) CREDIT PERIOD.—The term ‘credit period’ 
means the first 3 calendar years beginning after the 
date of the enactment of this section in which the 
eligible employer participates in the arrangement. 
‘‘(3) ELIGIBLE
EMPLOYER
PLAN.—The term 
‘eligible employer plan’ means a qualified employer 
plan within the meaning of section 4972(d). 
‘‘(c) OTHER RULES.—For purposes of this section, 
rules similar to the rules of section 45E(e)(2) shall 
apply.’’. 
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) is amended by striking 
‘‘plus’’ at the end of paragraph (40), by striking the period 
at the end of paragraph (41) and inserting ‘‘, plus’’, and 
by adding at the end the following new paragraph: 
‘‘(42) the small employer automatic IRA ar-
rangement 
credit 
determined 
under 
section 
45BB(a).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
is amended by adding at the end the following new item: 
‘‘Sec. 45BB. Credit for certain small employer automatic IRA arrangements.’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2024. 
SEC. 4. TREATMENT OF AUTOMATIC IRA ARRANGEMENTS 
UNDER STATE LAW. 
(a) PREEMPTION OF STATE LAW.—This Act, and the 
amendments made thereby, shall supersede any law of a 
State which would directly or indirectly prohibit or restrict 
an automatic IRA arrangement (as defined in section 
414(dd)(8) of the Internal Revenue Code of 1986). 
(b) EMPLOYERS MAINTAINING AUTOMATIC IRA AR-
RANGEMENT.— 
(1) IN GENERAL.—Any employer maintaining 
such an arrangement shall not be subject to any re-
quirement imposed by a State or political subdivision 
thereof to facilitate a payroll deduction savings pro-
gram of a State or political subdivision thereof. 
(2) QUALIFIED STATE LAW EXCEPTION.—Para-
graph (1) shall not apply with respect to any em-
ployer to the extent that such employer facilitates an 
arrangement under a qualified State law (as defined 
in section 4980J(f)(3) of the Internal Revenue Code 
of 1986) for employees with respect to whom such 
qualified State law applies. 
Æ 
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