Advancing Auto-Portability Act of 2022
Bill: H.R.9252 | Sponsor: Rep. Schneider, Bradley Scott (D-IL)
Policy area: Taxation

Summary:
Advancing Auto-Portability Act of 2022
This bill allows employees to transfer their retirement account upon terminating their employment to a similar account with a new employer. Specifically, it makes such transfers automatic, subject to the right of employees to opt out. It imposes certain requirements upon an automatic portability provider, including a requirement that the provider acknowledge its fiduciary status and provide a notice in advance to an employee whose retirement account is being transferred that contains a description of the automatic portability transaction and any fees charged in connection with the transaction.
This bill also allows an eligible employer a $500 tax credit in the year that an automatic portability arrangement is adopted.

To amend the Internal Revenue Code of 1986 to provide incentives for 
      the use of automatic portability arrangements under defined 
              contribution plans, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Advancing Auto-Portability Act of 
2022''.

SEC. 2. FINDINGS.

    Congress finds as follows:
            (1) Up to $105,000,000,000 of retirement savings leaves the 
        defined contribution pension plan system annually because 
        employees cash out their savings after a job change.
            (2) Federal law should encourage the private sector to 
        reduce such cash-outs by developing automated solutions to 
        improve defined contribution plan portability.

SEC. 3. PROHIBITED TRANSACTION EXEMPTION.

    (a) In General.--Section 4975(d) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``or'' at the end of paragraph (22)(I),
            (2) by striking the period at the end of paragraph (23) and 
        inserting ``, or'', and
            (3) by adding at the end the following new paragraph:
            ``(24) any transaction described in subparagraph (D) or (E) 
        of subsection (c)(1) which consists of the receipt of fees by 
        an automatic portability provider in connection with such 
        provider's exercise of discretion with respect to an automatic 
        portability transaction.''.
    (b) Definitions.--Section 4975(f) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(12) Rules relating to automatic portability 
        transactions.--
                    ``(A) In general.--For purposes of subsection 
                (d)(24)--
                            ``(i) Automatic portability transaction.--
                        An automatic portability transaction is a 
                        transfer of assets made--
                                    ``(I) from an individual retirement 
                                plan which is established on behalf of 
                                an individual and to which amounts were 
                                transferred under section 
                                401(a)(31)(B)(i),
                                    ``(II) to an employer-sponsored 
                                retirement plan described in clause 
                                (iii), (iv), (v), or (vi) of section 
                                402(c)(8)(B) (other than a defined 
                                benefit plan) in which such individual 
                                is an active participant, and
                                    ``(III) after such individual has 
                                been given advance notice of the 
                                transfer and has not affirmatively 
                                opted out of such transfer.
                            ``(ii) Automatic portability provider.--An 
                        automatic portability provider is a person that 
                        executes transfers described in clause (i).
                    ``(B) Conditions for automatic portability 
                transactions.--Subsection (d)(24) shall not apply to an 
                automatic portability transaction unless the following 
                requirements are satisfied:
                            ``(i) Acknowledgment of fiduciary status.--
                        An automatic portability provider shall 
                        acknowledge in writing, at such time and format 
                        as specified by the Secretary, that the 
                        provider is a fiduciary with respect to the 
                        individual on whose behalf the individual 
                        retirement plan described in subparagraph 
                        (A)(i)(I) is established.
                            ``(ii) Fees.--The fees and compensation 
                        received by the automatic portability provider 
                        in connection with the automatic portability 
                        transaction shall not exceed reasonable 
                        compensation and must be approved in writing by 
                        the plan fiduciary for the plan described in 
                        subparagraph (A)(i)(II).
                            ``(iii) Data usage.--The automatic 
                        portability provider shall not market or sell 
                        data relating to the individual retirement plan 
                        described in subparagraph (A)(i)(I).
                            ``(iv) Open participation.--The automatic 
                        portability provider shall offer automatic 
                        portability transactions on the same terms to 
                        any plan described in subparagraph (A)(i)(II) 
                        regardless of whether the provider provides 
                        other services for such plan.
                            ``(v) Pre-transaction notice.--At least 30 
                        days in advance of an automatic portability 
                        transaction, the automatic portability provider 
                        shall provide notice to the individual on whose 
                        behalf the individual retirement plan described 
                        in subparagraph (A)(i)(I) is established which 
                        includes--
                                    ``(I) a description of the 
                                automatic portability transaction and 
                                the fees which will be charged in 
                                connection with the transaction,
                                    ``(II) a description of the 
                                individual's right to affirmatively 
                                elect not to participate in the 
                                transaction, the procedures for such an 
                                election, and a telephone number at 
                                which the individual can contact the 
                                automatic portability provider, and
                                    ``(III) such other disclosures as 
                                the Secretary may require by 
                                regulation.
                            ``(vi) Post-transaction notice.--Not later 
                        than 3 business days after an automatic 
                        portability transaction, the automatic 
                        portability provider shall provide notice to 
                        the individual on whose behalf the individual 
                        retirement plan described in subparagraph 
                        (A)(i)(I) is established of--
                                    ``(I) the actions taken by the 
                                automatic portability provider with 
                                respect to the individual's account,
                                    ``(II) all relevant information 
                                regarding the location and amount of 
                                any transferred assets,
                                    ``(III) a statement of fees charged 
                                against the account by the automatic 
                                portability provider or its affiliates 
                                in connection with the transfer,
                                    ``(IV) a telephone number at which 
                                the individual can contact the 
                                automatic portability provider, and
                                    ``(V) such other disclosures as the 
                                Secretary may require by regulation.
                            ``(vii) Notice requirements.--The notices 
                        required under clauses (v) and (vi) shall be 
                        written in a manner calculated to be understood 
                        by the average intended recipient and shall not 
                        include materially misleading statements.
                            ``(viii) Timeliness of execution.--After 
                        liquidating the assets of an individual 
                        retirement plan described in subparagraph 
                        (A)(i)(I) to cash, an automatic portability 
                        provider shall transfer the account balance of 
                        such plan as soon as practicable to the plan 
                        described in subparagraph (A)(i)(II).
                            ``(ix) Record retention and audits.--
                                    ``(I) In general.--An automatic 
                                portability provider shall, for 6 
                                years, maintain the records sufficient 
                                to demonstrate the terms of this 
                                subparagraph have been met.
                                    ``(II) Audits.--An automatic 
                                portability provider shall conduct an 
                                annual audit of automatic portability 
                                transactions occurring during the 
                                calendar year to demonstrate compliance 
                                with this subparagraph, and shall 
                                submit such audit annually to the 
                                Secretary, in such form and manner as 
                                specified by the Secretary.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions occurring after December 31, 2023.

SEC. 4. EMPLOYER AUTOMATIC PORTABILITY ARRANGEMENT TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45U. EMPLOYER AUTOMATIC PORTABILITY ARRANGEMENT CREDIT.

    ``(a) In General.--For purposes of section 38, in the case of an 
eligible employer, the automatic portability arrangement credit 
determined under this section for the adoption year is an amount equal 
to $500.
    ``(b) Eligible Employer.--For purposes of this section, the term 
`eligible employer' has the meaning given the term by section 
408(p)(2)(C)(i) (without regard to subclause (II) thereof).
    ``(c) Adoption Year.--For purposes of this section--
            ``(1) In general.--The term `adoption year' means the 
        taxable year during which the eligible employer adopts an 
        automatic portability arrangement as part of an eligible plan 
        maintained by the employer.
            ``(2) Automatic portability arrangement.--
                    ``(A) In general.--The term `automatic portability 
                arrangement' means an arrangement providing for 
                automatic portability transactions.
                    ``(B) Automatic portability transaction.--The term 
                `automatic portability transaction' means a transaction 
                in which amounts distributed pursuant to section 
                401(a)(31)(B)(i) from a plan to an individual 
                retirement plan established on behalf of an individual 
                are subsequently transferred to an eligible plan in 
                which such individual is an active participant, after 
                such individual has been given advance notice of the 
                transfer and has not affirmatively opted out of such 
                transfer.
            ``(3) Eligible plan.--The term `eligible plan' means a 
        qualified employer plan as defined in section 4972(d)(1), other 
        than a defined benefit plan.''.
    (b) Credit To Be Part of General Business Credit.--Subsection (b) 
of section 38 of the Internal Revenue Code of 1986 is amended by 
striking ``plus'' at the end of paragraph (32), by striking the period 
at the end of paragraph (33) and inserting ``, plus'', and by adding at 
the end the following new paragraph:
            ``(34) in the case of an eligible employer (as defined in 
        section 45U(b)), the automatic portability arrangement credit 
        determined under section 45U(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 45U. Employer automatic portability arrangement credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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