I 
112TH CONGRESS 
2D SESSION 
H. R. 4049 
To amend the Internal Revenue Code of 1986 to expand personal saving 
and retirement savings coverage by enabling employees not covered by 
qualifying retirement plans to save for retirement through automatic 
IRA arrangements, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 16, 2012 
Mr. NEAL (for himself and Mr. BLUMENAUER) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Education and the Workforce, for a period to 
be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to expand 
personal saving and retirement savings coverage by ena-
bling employees not covered by qualifying retirement 
plans to save for retirement through automatic IRA ar-
rangements, 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; REFERENCE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Automatic IRA Act of 2012’’. 
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(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
SEC. 2. EMPLOYEES NOT COVERED BY QUALIFYING RE-
TIREMENT PLANS OR ARRANGEMENTS ENTI-
TLED TO PARTICIPATE IN AUTOMATIC IRA 
ARRANGEMENTS. 
(a) IN GENERAL.—Subpart A of part I of subchapter 
D of chapter 1 (relating to pension, profit-sharing, stock 
bonus plans, etc.) is amended by inserting after section 
408A the following new section: 
‘‘SEC. 408B. RIGHT TO AUTOMATIC IRA ARRANGEMENTS AT 
WORK. 
‘‘(a) REQUIREMENT TO PROVIDE AUTOMATIC IRA 
ARRANGEMENT.—Each covered employer shall make 
available to each qualifying employee of the employer for 
the calendar year an automatic IRA arrangement. 
‘‘(b) COVERED EMPLOYER.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection or subsection (c)(2), the 
term ‘covered employer’ means, with respect to any 
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year, an employer which does not maintain a quali-
fying plan or arrangement described in section 
219(g)(5) for the calendar year. 
‘‘(2) EXCLUDED PLANS.—A qualifying plan or 
arrangement shall not be taken into account for pur-
poses of paragraph (1) if— 
‘‘(A) the plan or arrangement is frozen as 
of the first day of the preceding calendar year, 
or 
‘‘(B) in the case of a plan or arrangement 
under which the only contributions are discre-
tionary on the part of the employer or other 
plan sponsor, no employer contribution has 
been made to the plan or arrangement for the 
2-plan-year period ending with the last plan 
year ending in the second preceding calendar 
year and it is not reasonable to assume that an 
employer contribution will be made for the last 
plan year ending in the preceding calendar 
year. 
‘‘(3) EXCEPTION
FOR
CERTAIN
SMALL
AND 
NEW EMPLOYERS.— 
‘‘(A) IN GENERAL.—The term ‘covered em-
ployer’ does not include an employer for a cal-
endar year if the employer either— 
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‘‘(i) did not employ more than 10 em-
ployees who received at least $5,000 of 
compensation 
(as 
defined 
in 
section 
3401(a)) from the employer for the pre-
ceding calendar year, 
‘‘(ii) did not normally employ more 
than 10 employees on a typical business 
day of the preceding calendar year, or 
‘‘(iii) was not in existence at all times 
during the calendar year and the preceding 
calendar year. 
‘‘(B) OPERATING RULES.—In determining 
the number of employees for purposes of sub-
paragraph (A)— 
‘‘(i) rules consistent with any rules 
applicable in determining the number of 
employees 
for 
purposes 
of 
section 
408(p)(2)(C) and section 4980B(d) shall 
apply, 
‘‘(ii) all members of the same family 
(within the meaning of section 318(a)(1)) 
shall be treated as 1 individual, and 
‘‘(iii) any reference to an employer 
shall include a reference to any predecessor 
employer. 
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‘‘(A) the employee shall be deemed to have 
made an election to make contributions and 
payments in the amount determined under such 
clause, 
‘‘(B) such contributions shall— 
‘‘(i) if the employer has made an elec-
tion under subsection (f)(2), be transferred 
to an individual retirement plan of the des-
ignated trustee or issuer but only if the 
contributions are invested as provided in 
paragraph (5), or 
‘‘(ii) be applied toward the purchase 
of a retirement bond. 
‘‘(4) AMOUNT
OF
CONTRIBUTIONS
AND
PAY-
MENTS.— 
‘‘(A) IN GENERAL.—The amount specified 
in this paragraph is— 
‘‘(i) 3 percent of compensation, or 
‘‘(ii) such other percentage of com-
pensation as is specified in regulations pre-
scribed by the Secretary which is not less 
than 2 percent or more than 6 percent. 
‘‘(B) AUTHORITY TO PROVIDE FOR PERI-
ODIC INCREASES.—In the case of qualifying em-
ployees under an automatic IRA arrangement 
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for 2 or more consecutive years, the Secretary 
may by regulation provide for periodic (not 
more frequent than annual) increases in the 
percentage of compensation an employee is 
deemed to have elected under subparagraph 
(A). The considerations the Secretary shall take 
into account in issuing any regulations under 
this subparagraph and subparagraph (A) shall 
include the potential effects on lower-income 
employees as well as on adequacy of savings. 
‘‘(C) PERMITTED
ADDITIONAL
PROCE-
DURES
TO
LIMIT
CONTRIBUTIONS.—An em-
ployer— 
‘‘(i) shall have no responsibility for 
any calendar year for determining whether, 
or ensuring that, the contributions with re-
spect to any employee do not exceed the 
deductible amount in effect for taxable 
years beginning in the calendar year under 
section 219(b)(5) (determined without re-
gard to subparagraph (B) thereof), and 
‘‘(ii) 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 chooses to limit the 
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contributions under this subsection on be-
half of a qualifying employee for any cal-
endar year in a manner reasonably de-
signed to avoid exceeding such deductible 
amount. 
‘‘(5) REQUIRED INVESTMENTS.— 
‘‘(A) IN GENERAL.—Amounts contributed 
under paragraph (3)(B)(i) shall be invested 
only in the class of assets or funds described in 
subparagraph (B) unless the employer elects a 
class of assets or funds described in subpara-
graph (C) or (D). 
‘‘(B) TARGET DATE/LIFECYCLE OPTION.— 
The class of assets or funds described in this 
subparagraph is the class of assets or funds 
that constitutes a qualified default investment 
alternative under Department of Labor regula-
tion section 2550.404c–5(e)(4)(i). 
‘‘(C) 
PRINCIPAL
PRESERVATION.—The 
class of assets or funds described in this sub-
paragraph is the class of assets or fund that is 
designed to protect the principal of the indi-
vidual on an ongoing basis, including passbook 
savings, certificates of deposit, insurance con-
tracts, mutual funds, United States savings 
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bonds (which may be indexed for inflation), and 
similar assets specified in regulations. 
‘‘(D) BALANCED
OPTION.—The class of 
assets or funds described in this subparagraph 
is the class of assets or funds that constitutes 
a qualified default investment alternative under 
Department 
of 
Labor 
regulation 
section 
2550.404c–5(e)(4)(ii). 
‘‘(6) COORDINATION
WITH
WITHHOLDING.— 
The Secretary shall modify the withholding exemp-
tion certificate under section 3402(f) so that, in the 
case of any qualifying employee covered under an 
automatic IRA arrangement, any notice and election 
requirements with respect to the arrangement may 
be met through the use of an attachment to such 
certificate or other modifications of the withholding 
exemption procedures. 
‘‘(7) TREATMENT
AS
IRA.—A qualifying em-
ployee for whom an automatic IRA is established 
under paragraph (1) may elect, at such time and in 
such manner and form as the Secretary may pre-
scribe, whether to treat the individual retirement 
plan as described, or not described, in section 408A. 
If no such election is made, the plan shall be treated 
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as described in section 408A and shall meet the re-
quirements of section 408A. 
‘‘(8) EMPLOYER’S OPTION TO OBTAIN AFFIRMA-
TIVE
ELECTIONS
FROM
EMPLOYEES
INSTEAD
OF 
AUTOMATIC
ENROLLMENT.—As an alternative to 
automatic enrollment, an employer may choose to 
comply with subsection (d)(1)(B)(ii) by notifying 
employees that the employer wishes to obtain from 
each qualifying employee an affirmative election ei-
ther to contribute or not to contribute to an auto-
matic IRA, provided that any qualifying employee 
who fails to make such an election is treated in the 
manner provided under subsection (d)(1)(B)(ii). 
‘‘(e) AUTOMATIC IRA CONTRIBUTIONS AND RETIRE-
MENT BOND PURCHASES TREATED LIKE OTHER CON-
TRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS.— 
‘‘(1) TAX TREATMENT UNAFFECTED.—The fact 
that a contribution to an individual retirement plan 
or purchase of a retirement bond is made on behalf 
of an employee under an automatic IRA arrange-
ment instead of being made directly by the employee 
shall not affect the deductibility or other tax treat-
ment of the contribution or of other amounts under 
this title. 
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‘‘(2) PAYROLL SAVINGS CONTRIBUTIONS TAKEN 
INTO ACCOUNT.—Any contribution to an individual 
retirement plan or purchase of a retirement bond 
made on behalf of an employee under an automatic 
IRA arrangement shall be taken into account in ap-
plying the limitations on contributions to individual 
retirement plans and the other provisions of this 
title applicable to individual retirement plans as if 
the contribution or purchase had been made directly 
by the employee. 
‘‘(f) DEPOSITS TO PLANS OF A DESIGNATED TRUST-
EE OR ISSUER AND FOR RETIREMENT BONDS.— 
‘‘(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 to the 
Secretary or his agent for the purchase of retirement 
bonds specified in paragraph (3). 
‘‘(2) INDIVIDUAL RETIREMENT PLANS OTHER 
THAN
THOSE
SELECTED
BY
EMPLOYEE.—An em-
ployer may elect to have contributions for all quali-
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fying employees participating in an automatic IRA 
arrangement made to individual retirement plans of 
a trustee or issuer under the arrangement that has 
been designated by the employer. The preceding sen-
tence shall not apply unless each participant is noti-
fied in writing that the participant’s balance may be 
transferred without cost or penalty to another indi-
vidual retirement plan established by or on behalf of 
the participant. 
‘‘(3) RETIREMENT BONDS.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
provide that contributions deposited under sub-
paragraph (B) shall be applied to the purchase 
of a retirement bond in the name of each appli-
cable employee. 
‘‘(B) PAYROLL DEPOSIT FEATURES.—The 
Secretary shall establish procedures so that con-
tributions may be applied to the purchase of re-
tirement bonds without undue administrative or 
paperwork requirements on participating em-
ployers. Such procedures shall ensure that only 
1 such retirement bond of each type (traditional 
or Roth) is issued for each TIN. 
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‘‘(4) PAYROLL TAX DEPOSIT PROCEDURE.—The 
procedures the Secretary shall establish may include 
a procedure under which an employer— 
‘‘(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 qualifying 
employees have designated under subsection 
clause (i)(I) of subsection (d)(1)(B) (or are 
deemed to have designated under clause (ii) of 
such subsection) as contributions to purchase 
retirement bonds on behalf of the employees 
under paragraph (3), and 
‘‘(B) specifies, in such manner as the Sec-
retary may prescribe, information needed to 
purchase retirement bonds on behalf of each ap-
plicable employee for whom a contribution is to 
be made, including— 
‘‘(i) the employee’s name and TIN, 
and 
‘‘(ii) the amount of the contribution. 
‘‘(5) PURPOSES.—The purposes of the retire-
ment bond program established under this sub-
section and subsection (g) include— 
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‘‘(A) providing new savers a convenient, 
low-cost investment option suitable for the ini-
tial accumulation of small automatic IRA con-
tributions, 
‘‘(B) to reflect the intent that the long- 
term investment of automatic IRA funds for 
most savers be in the private market rather 
than in retirement bonds, encouraging and as-
sisting 
individuals 
who 
accumulate 
larger 
amounts in retirement bonds to transfer those 
funds to individual retirement plans in the pri-
vate market, while 
‘‘(C) permitting individuals to remain in-
vested in retirement bonds if they choose to do 
so. 
‘‘(6) REGULATIONS.—The Secretary may issue 
such regulations as are necessary to carry out the 
purposes of this subsection and subsection (g), in-
cluding— 
‘‘(A) establishment of procedures to com-
municate to individuals the importance of in-
vestment diversification and the transfer option 
described in subparagraph (B), 
‘‘(B) simplified procedures under which 
holders of retirement bonds may periodically 
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choose to have the bonds or their proceeds 
transferred to available individual retirement 
plans, and 
‘‘(C) means by which individuals may elect 
(or be treated as electing) whether to have re-
tirement bonds or their proceeds so transferred. 
Any such transfer shall be treated as a rollover con-
tribution for purposes of section 408(d)(3) (other 
than subparagraph (B) thereof). 
‘‘(g) RETIREMENT BOND.— 
‘‘(1) RETIREMENT
BOND.—The term ‘retire-
ment bond’ means a bond issued under chapter 31 
of title 31, which by its terms, or by regulations pre-
scribed by the Secretary under such chapter— 
‘‘(A) provides for interest to be credited at 
rates that take into account the expected dura-
tion of the funds invested in retirement bonds 
and at rates determined or adjusted in a man-
ner and with sufficient frequency to provide 
substantial protection from inflation, 
‘‘(B) is not transferable, and 
‘‘(C) is designed for investment for retire-
ment under automatic IRA arrangements or 
other savings vehicles. 
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‘‘(2) INDIVIDUAL RETIREMENT PLAN RULES AP-
PLICABLE.—The provisions of this title applicable to 
an individual retirement plan (as defined in section 
7701(a)(37)), including provisions relating to con-
tributions, holding and distributions, shall apply to 
a retirement bond, except as determined by the Sec-
retary. 
‘‘(3) ANNUAL STATEMENT.—As soon as prac-
ticable after the close of the calendar year, the Sec-
retary shall make available an annual statement to 
each participant setting forth— 
‘‘(A) payments made by or on behalf of the 
participant for the retirement bond, 
‘‘(B) amounts earned by the retirement 
bond, 
‘‘(C) the value of the account as of the 
close of such calendar year, 
‘‘(D) the importance of diversifying retire-
ment savings, 
‘‘(E) the benefits of a well-balanced and di-
versified investment portfolio, 
‘‘(F) a notice of the internet website of the 
Department of Labor for sources of information 
on individual investing and diversification, 
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‘‘(G) the procedures for redeeming a re-
tirement bond and directly transferring the re-
deemed amount into an individual retirement 
plan, 
‘‘(H) other factors affecting retirement 
savings decisions, and 
‘‘(I) such other information as the Sec-
retary determines necessary or appropriate. 
‘‘(h) MODEL NOTICE.—The Secretary shall— 
‘‘(1) provide a model notice, written in a man-
ner calculated to be understandable to the average 
worker, that is simple for employers to use— 
‘‘(A) to notify employees of the require-
ment under this section for the employer to pro-
vide certain employees with the opportunity to 
participate in an automatic IRA arrangement, 
and 
‘‘(B) to satisfy the requirements of sub-
section (d)(2)(C), 
‘‘(2) provide uniform forms for enrollment, in-
cluding automatic enrollment, in an automatic IRA 
arrangement, and 
‘‘(3) establish a website or other electronic 
means that small employers can access and use to 
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obtain information on automatic IRA arrangements 
and to obtain required notices and forms. 
The information referred to in paragraph (3) shall 
be provided in a manner designed to assist employ-
ers and providers by facilitating the identification by 
employers of private-sector providers of individual 
retirement plans and associated investment options 
that are appropriate for use in automatic IRA ar-
rangements. 
‘‘(i) CROSS REFERENCE.—For provision preempting 
conflicting State laws, see section 2(k) of the Automatic 
IRA Act of 2012.’’. 
(b) 
MANDATORY
TRANSFERS.—Section 
401(a)(31)(B) is amended— 
(1) by inserting ‘‘(including an automatic IRA 
arrangement)’’ after ‘‘individual retirement plan’’ 
each place it appears, and 
(2) by adding at the end the following new sen-
tence: ‘‘Any amount so transferred (and any earn-
ings thereon) shall be invested in a default invest-
ment described in section 408B(d)(5).’’. 
(c) PENALTY FOR FAILURE TO TIMELY REMIT CON-
TRIBUTIONS TO AUTOMATIC IRA ARRANGEMENTS.—Sec-
tion 4975(c) is amended by adding at the end the fol-
lowing new paragraph: 
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‘‘(7) SPECIAL RULE FOR AUTOMATIC IRA AR-
RANGEMENTS.—For purposes of paragraph (1), if 
an employer is required under an automatic IRA ar-
rangement under section 408B to deposit amounts 
withheld from an employee’s compensation into an 
automatic IRA or toward the purchase of a retire-
ment bond but fails to do so within the time pre-
scribed under section 408B(d)(2)(A), such amounts 
shall be treated as assets of the automatic IRA.’’. 
(d) COORDINATION WITH EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.— 
(1) EXEMPTION.— 
(A) IN
GENERAL.—Section 3(2) of the 
Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(2)) is amended— 
(i) by inserting ‘‘or (C)’’ after ‘‘sub-
paragraph (B)’’ in subparagraph (A), and 
(ii) by adding at the end the following 
new subparagraph: 
‘‘(C) An automatic IRA arrangement de-
scribed in section 408B(d) of the Internal Rev-
enue Code of 1986 shall not be treated as an 
employee pension benefit plan or pension plan 
if, under the arrangement, contributions are to 
be made to an automatic IRA the provider of 
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which is included in the website list established 
under section 408B(h)(3) of such Code, are to 
be made to an individual retirement plan des-
ignated by the employee, or are to be invested 
in retirement bonds (whether to the Secretary 
of the Treasury or to a designated trustee or 
other agent for that purpose).’’. 
(B) 
CUSTOMER
IDENTIFICATION
PRO-
GRAM.—Notwithstanding the amendment made 
by subparagraph (A), an individual retirement 
plan established pursuant to an automatic IRA 
arrangement described in section 408B(d) of 
the Internal Revenue Code of 1986 shall, for 
purposes of any customer identification pro-
gram established under section 5318(l) of title 
31, United States Code, be treated as an ac-
count opened for the purpose of participating in 
an employee benefit plan established under the 
Employee Retirement Income Security Act of 
1974. 
(2) FIDUCIARY DUTIES.—Section 404(c)(2) of 
such Act is amended— 
(A) by inserting the following sentence be-
fore the last sentence: ‘‘In the case of an auto-
matic IRA under section 408B of such Code 
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that is not exempt under section 3(2)(C), a par-
ticipant or beneficiary shall, for purposes of 
paragraph (1), be treated as exercising control 
over the assets in the account on and after the 
7th day after notice has been given to an em-
ployee that such automatic IRA has been estab-
lished on behalf of the employee.’’, and 
(B) by inserting ‘‘or with respect to an 
automatic IRA under section 408B of such 
Code’’ after ‘‘arrangement’’ in the last sen-
tence. 
(e) NOTICE
OF
AVAILABILITY
OF
INVESTMENT 
GUIDELINES.— 
(1) IN GENERAL.—Section 408(i) (relating to 
reports) is amended by adding at the end the fol-
lowing new sentences: ‘‘Any report furnished under 
paragraph (2) to an individual shall include notice of 
the internet website of the Department of Labor for 
sources of information on individual investing and 
diversification.’’. 
(2) UPDATE INFORMATION.—Such information 
shall be modified (or updated) by the Secretary of 
Labor in consultation with the Secretary of the 
Treasury and the Chairman of the Securities and 
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Exchange Commission to address needed changes 
due to the creation of automatic IRAs. 
(f) FAILURE TO PROVIDE ACCESS TO PAYROLL SAV-
INGS ARRANGEMENTS.—Chapter 43 (relating to qualified 
pension, etc., plans) is amended by adding at the end the 
following new section: 
‘‘SEC. 4980J. REQUIREMENTS FOR COVERED EMPLOYERS 
TO PROVIDE EMPLOYEES ACCESS TO AUTO-
MATIC IRA ARRANGEMENTS. 
‘‘(a) GENERAL RULE.—There is hereby imposed a 
tax on any failure by a covered employer (as defined in 
section 408B) to meet the requirements of subsection (d) 
for a calendar year. 
‘‘(b) AMOUNT.— 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure for any cal-
endar year shall be $100 with respect to each em-
ployee to whom such failure relates. 
‘‘(2) TAX NOT TO APPLY WHERE FAILURE NOT 
DISCOVERED
AND
REASONABLE
DILIGENCE
EXER-
CISED.—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 the 
employer subject to liability for the tax did not know 
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that the failure existed and exercised reasonable dili-
gence to meet the requirements of subsection (d). 
‘‘(3) TAX NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 90 DAYS.—No tax shall be imposed 
by subsection (a) on any failure if— 
‘‘(A) the employer subject to liability for 
the tax under subsection (a) exercised reason-
able diligence to meet the requirements of sub-
section (d), and 
‘‘(B) the employer provides the automatic 
IRA arrangement described in section 408B to 
each employee eligible to participate in the ar-
rangement by the end of the 90-day period be-
ginning on the first date the employer knew, or 
exercising reasonable diligence would have 
known, that such failure existed. 
‘‘(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 or 
otherwise inequitable relative to the failure involved. 
‘‘(c) PROCEDURES FOR NOTICE.—The Secretary may 
prescribe and implement procedures for obtaining con-
firmation that employers are in compliance with the re-
VerDate Mar 15 2010 
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