S. 3760 (111th): Automatic IRA Act of 2010

111th Congress, 2009–2010. Text as of Aug 05, 2010 (Introduced).

Status & Summary | PDF | Source: GPO

II

111th CONGRESS

2d Session

S. 3760

IN THE SENATE OF THE UNITED STATES

August 5, 2010

(for himself and Mr. Kerry) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to expand personal savings and retirement savings coverage by allowing employees not covered by qualified retirement plans to save for retirement through automatic IRAs, and for other purposes.

1.

Short title

This Act may be cited as the Automatic IRA Act of 2010.

2.

Employees not covered by qualified retirement plans or arrangements entitled to participate in automatic IRA arrangements

(a)

In general

Subchapter D of chapter 1 of the Internal Revenue Code of 1986 (relating to pension, profit-sharing, stock bonus plans, etc.) is amended by inserting at the end the following new part:

IV

Automatic IRA arrangements

Sec. 438. Right to automatic IRA arrangements at work.

Sec. 439. Automatic IRAs.

Sec. 440. Rules relating to choice of IRA providers.

438.

Right to automatic IRA arrangements at work

(a)

Requirement To provide automatic IRA arrangement

If an applicable employer does not maintain a qualified plan or arrangement (as defined in subsection (i)) for any calendar year, the employer shall make available an automatic IRA arrangement which meets the requirements of this section to each qualifying employee of the employer for the calendar year.

(b)

Qualifying employee defined

For purposes of this section—

(1)

In general

The term qualifying employee means any employee of the employer other than an excludable employee.

(2)

Excludable employee

The term excludable employee means any employee who is in one of the following categories of employees that the employer elects to exclude from treatment as qualifying employees—

(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, or

(C)

employees who have not completed at least 3 months of service with the employer.

(3)

Exception for employees of governments and churches

The term qualifying employee shall not include an employee of—

(A)

a government or entity described in section 414(d), or

(B)

a church or a convention or association of churches which is exempt from tax under section 501, including any employee described in section 414(e)(3)(B).

(4)

Plan sponsor’s employees

(A)

In general

If—

(i)

an employer maintains 1 or more qualified plans or arrangements, and

(ii)

the employees of a subsidiary, division, or other major business unit of the employer are not generally eligible to participate in any such qualified plan or arrangement,

then, except as provided in subparagraph (B), the employer shall make available an automatic IRA arrangement which meets the requirements of this section to all qualifying employees described in clause (ii) for the calendar year.
(B)

Exception for certain employees

An employer may exclude from coverage under the automatic IRA arrangement under subparagraph (A)—

(i)

any employee not eligible to participate in any qualified plan or arrangement solely because the employee has not satisfied the minimum age and service requirements for participation in the plan or arrangement,

(ii)

in the case of an employer which maintains a qualified plan or arrangement which consists of a section 403(b) annuity contract (including a custodial account), an arrangement described in section 408(p), or a simplified employee pension described in section 408(k), any employee who is permitted to be excluded from, or who is not required to be eligible to participate in, any such plan, arrangement, or pension under section 403(b)(12), 408(p)(4), or 408(k)(2), whichever is applicable.

(5)

Designation of qualifying employees

The Secretary shall issue guidelines for determining the class or classes of qualifying employees to be covered by an automatic IRA arrangement. Such guidelines shall permit employers to designate under paragraph (2) the classification or categories of employees who are not eligible for the arrangement.

(6)

Employee includes self-employed

For purposes of this part, an employer described in section 401(c)(4) may elect to treat self-employed individuals (within the meaning of section 401(c)(1)) as employees of the trade or business, except that if the employer has employees other than such individuals, the employer may only make the election under this paragraph if the employer makes available an automatic IRA arrangement to such other employees in accordance with the rules of subsection (a) and paragraph (4).

(c)

Automatic IRA arrangement

For purposes of this section, the term automatic IRA arrangement means an arrangement of an employer—

(1)

under which, in accordance with subsection (d)—

(A)

a qualifying employee may elect to have an amount contributed to a designated automatic IRA established on behalf of the employee instead of having that amount paid to the employee directly in cash,

(B)

a qualifying employee is treated as having elected such contributions in the amount specified in subsection (d)(2) until the employee specifically elects not to have such contributions made (or specifically elects to have such contributions made at a different percentage or in a different amount), and

(C)

the contributions are invested as provided in subsection (d)(3),

(2)

under which payments are to be made to the designated automatic IRA of each qualifying employee by having the employer of the employee—

(A)

make periodic direct deposit or other payroll deposit payments (including electronic payments) to the plan by payroll deduction, or

(B)

in the case of employees not paid through regular periodic payments, make such deposit or payments in such manner as the Secretary may provide in guidance, including through available automatic debit or similar arrangements or the use of authorized intermediary entities such as business, professional, or trade associations,

(3)

under which the payments described in paragraph (1) are to be made by the employer on or before—

(A)

the last day of the month following the month in which the compensation would otherwise have been payable to the employee in cash, or

(B)

such later date as the Secretary may prescribe, except that the Secretary may not prescribe a date later than 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 relate, and

(4)

which meets the notice and election requirements of subsection (e).

(d)

Definitions and rules relating to automatic enrollment requirements

For purposes of this section—

(1)

Designated automatic IRA

(A)

In general

Except as provided in subparagraph (B), the term designated automatic IRA means, with respect to any automatic IRA arrangement of an employer, an automatic IRA of a provider designated by, or on behalf of, the employer under subsection (g).

(B)

IRA specified by employee

An employer may also elect to allow each of its qualifying employees to designate an individual retirement plan (whether or not an automatic IRA) established by or on behalf of the employee as the designated automatic IRA with respect to that employee.

(C)

Special rules

(i)

Notice requirement

If contributions are made to designated automatic IRAs that are designated by the employer in accordance with subparagraph (A), the employer shall provide each participating employee a standard written notice, as provided by the Secretary, that the employee’s balance may be periodically transferred without cost or penalty from the designated automatic IRA to another individual retirement plan, or to a retirement bond described in section 440(d), established by or on behalf of the employee.

(ii)

Treatment of periodic transfers

For tax treatment of transfers described in clause (i), see subsection (f)(3).

(D)

Contributions to designated automatic iras

An employer shall not be treated as failing to satisfy the requirements of this section or any other provision of this title merely because the employer makes all contributions (or all contributions on behalf of qualifying employees who do not specify a designated automatic IRA under subparagraph (B)) to a designated automatic IRA or to a retirement bond described in section 440(d) and held on behalf of the employee.

(2)

Amount of contributions

(A)

In general

The amount specified in this paragraph is—

(i)

3 percent of compensation, or

(ii)

such other percentage of compensation as is specified in regulations prescribed by the Secretary which is not less than 2 percent or more than 4 percent.

(B)

Authority of Secretary to provide for periodic increases

In the case of qualifying employees under an automatic IRA arrangement 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).

(C)

Permitted additional procedures to limit contributions

An employer—

(i)

shall have no responsibility for any calendar year for determining whether, or ensuring that, the contributions with respect 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 regard 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 because the employer chooses to limit the contributions under this subsection on behalf of a qualifying employee for any calendar year in a manner reasonably designed to avoid exceeding such deductible amount.

(3)

Investment of assets in automatic iras

(A)

Investment in specified options

Amounts contributed under this subsection for a calendar year shall, unless otherwise directed by the qualifying employee, be invested in—

(i)

the principal preservation investment option of the designated automatic IRA described in section 439(c)(2)(A) if, as of the close of the preceding calendar year or at such other time as may be prescribed by the Secretary, the outstanding balance of such plan was less than the amount described in paragraph (2)(C)(i), and

(ii)

if clause (i) does not apply, the blended investment option of the designated automatic IRA described in section 439(c)(2)(B),

except that the Secretary may provide by regulation or other guidance that, in the case of a designated automatic IRA to which clause (ii) applies, amounts previously invested in the principal preservation option shall be reinvested in the blended investment option.
(B)

Type of automatic ira

A qualifying employee for whom a designated automatic IRA is established under paragraph (1)(A) may elect, at such time and in such manner and form as the Secretary may prescribe, whether to treat the plan as described, or not described, in section 408A. If no such election is made, the plan shall be treated as described in section 408A.

(4)

Alternative automatic enrollment procedure

An arrangement shall not be treated as failing to meet the automatic enrollment requirements under subsection (c)(1)(B) merely because the employer, in accordance with guidance prescribed by the Secretary, elects to provide employees with communications informing the employees that the employer wishes to obtain from each employee an affirmative election either to contribute (including specification by the employee of the information necessary to permit the election to be implemented) or not to contribute to an automatic IRA, except that such employer shall treat any employee who fails to make such an election in the manner provided under subsection (c)(1)(B).

(e)

Election and notice requirements

(1)

Election requirements

Each automatic IRA arrangement shall permit—

(A)

each qualifying employee to elect, during the 60-day period or other period specified by the Secretary before the beginning of any calendar year (and during the 60-day period or other period specified by the Secretary before the first day the employee is eligible to participate), to participate in the arrangement, 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, and

(B)

subject to a requirement for reasonable notice, an employee to elect to terminate participation in the arrangement at any time during a calendar year, except that if an employee so terminates, the employer may provide that the employee may not resume participation until the beginning of the next calendar year.

(2)

Employer notice

Under an automatic IRA arrangement, the employer shall provide, within a reasonable period before the beginning of each period described in paragraph (1)(A), a notice to each qualifying employee meeting the requirements of section 414(w)(4).

(3)

Model notice, forms, and website

The Secretary, in consultation with the Secretary of Labor, shall—

(A)

provide a model notice, written in a manner calculated to be understandable to the average worker, that is simple for employers to use, that meets the requirements of paragraph (2), and that informs qualifying employees of the automatic enrollment arrangement (including the types of individual retirement plans to which contributions may be deposited),

(B)

provide model forms for enrollment, including automatic enrollment, in an automatic IRA arrangement, and

(C)

establish an Internet website under section 440 that allows employers and individuals to obtain information on automatic IRA arrangements and on saving and investing for retirement, and to obtain required notices and forms.

(4)

Coordination with withholding

The Secretary shall modify the withholding exemption 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.

(f)

Automatic 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 a qualifying employee under an automatic IRA arrangement instead of being made directly by the employee shall not affect the deductibility 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 a qualifying employee under an automatic IRA arrangement shall be taken into account in applying the limitations 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.

(3)

Rollover limit not to apply

For purposes of section 408(d)(3)(B), there shall be disregarded any qualified rollover contribution which is a transfer described in subsection (d)(1)(C)(i).

(g)

Designation of provider for employer's automatic IRA arrangement

(1)

In general

For purposes of subsection (d)(1)(A), the provider of an automatic IRA under any automatic IRA arrangement of an employer shall be the trustee or issuer of the individual retirement plan and shall be determined under one of the following methods:

(A)

Provider designated by employer

(i)

In general

An employer may designate a single provider for the automatic IRA arrangement.

(ii)

Exemption from erisa

If the provider designated by the employer is included on the list of providers contained in the website established under section 440(b), see the exemption under section 3(2)(C) of the Employee Retirement Income Security Act of 1974 of the arrangement from such Act.

(B)

Election to use default provider

An employer may elect to have the provider selected on the employer’s behalf under the procedures established under section 440(c).

(C)

Election to invest in retirement bonds

An employer may elect to have the provider be the Secretary by electing to have contributions under an automatic IRA arrangement invested in retirement bonds described in section 440(d).

(2)

Multiple employer arrangements and use of record keepers

An employer shall be treated as meeting the requirements of this subsection if, in accordance with the procedures established under section 440(e), the provider is selected through the use of a record keeper described in section 440(e)(1)(A), a sponsor of a multiple employer arrangement described in section 440(e)(1)(B), or another intermediary authorized by the Secretary under section 440(e)(1)(C).

(h)

Applicable employer

For purposes of this section—

(1)

In general

The term applicable employer means, with respect to any calendar year, an employer which had at least the applicable number of employees who received at least $5,000 of compensation (as defined in section 408(p)(6)(A)) from the employer for the preceding calendar year.

(2)

Employers not in existence

Such term shall not include an employer which was not in existence at all times during the calendar year and the preceding calendar year.

(3)

Operating rules

In determining the number of employees for purposes of this subsection—

(A)

any rule applicable in determining the number of employees for purposes of section 408(p)(2)(C) shall be applicable under this subsection,

(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 include a reference to any predecessor employer.

(4)

Applicable number

For purposes of paragraph (1), the term applicable number means the number of employees determined in accordance with the following table:

If the calendar
year is:
The applicable
number for the
preceding calendar
year is:
2012100
201350
201425
2015 or thereafter10.
(i)

Qualified plan or arrangement

For purposes of this section—

(1)

In general

The term qualified plan or arrangement means a plan, contract, pension, or trust described in section 219(g)(5).

(2)

Excluded plans

Such term shall not include a plan or arrangement 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 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 preceding calendar year and it is not reasonable to assume that an employer contribution will be made for the plan year ending in the preceding calendar year.

(j)

Authority

The Secretary may prescribe rules to prevent avoidance of the requirements of this section through the use of insubstantial, frozen, or suspended plans or arrangements or by other means.

439.

Automatic IRAs

(a)

General rule

For purposes of this title—

(1)

an automatic IRA shall be treated in the same manner as an individual retirement plan, and

(2)

the determination of whether the automatic IRA is described in section 408 or 408A shall be made on the basis of whether it meets the requirements of either such section.

(b)

Automatic IRA

For purposes of this section, the term automatic IRA means an individual retirement plan (as defined in section 7701(a)(37)) which meets the investment and fee requirements set forth in this section.

(c)

Investment options

(1)

In general

The Secretary of Labor and the Secretary, in consultation with the Chairman of the Securities and Exchange Commission, shall, not later than 18 months after the date of the enactment of this section, prescribe regulations which set forth the requirements for each of the classes of investments described in paragraph (2) and procedures for determining which assets meet the requirements for each of such classes.

(2)

Investment classes

The regulations under paragraph (1) shall provide that an automatic IRA shall allow the individual on whose behalf the individual retirement plan is established to invest contributions to, and earnings of, the plan only in the following investment options:

(A)

Principal preservation

A class of assets or fund that is designed to protect the principal of the individual on an ongoing basis, including passbook savings, certificates of deposit, insurance contracts, mutual funds, United States savings bonds (which may be indexed for inflation), or similar classes of assets.

(B)

Blended investment option

A broadly diversified class of assets or fund, as specified in such regulations, that is substantially similar to target date, life cycle, balanced or similar funds, as so specified.

(C)

Third option

A broadly diversified class of assets or fund providing a somewhat higher investment in equities than the investment options under subparagraph (B), as specified in such regulations.

(3)

Use of low-cost funds; avoidance of complexity

The Secretary of Labor and the Secretary shall, in the regulations prescribed under paragraph (1), provide that the investment options under subparagraphs (A), (B), and (C) thereof be based on low-cost investment options, which may include index funds, and provide that such investment options avoid undue complexity.

(4)

Flexibility

The Secretary of Labor and the Secretary, in consultation with the Chairman of the Securities and Exchange Commission, shall periodically review the investment options under paragraph (2) to ensure that such options include appropriate alternative investment options that become available after the initial investment options are established. The Secretary of Labor and the Secretary, in consultation with the Chairman of the Securities and Exchange Commission, may revise such options if the Secretary of Labor and the Secretary determine necessary, but only to the extent that the new options—

(A)

are consistent with the risk-return profiles of the investment classes described in paragraph (2), and

(B)

are low-cost investment options as provided in paragraph (3).

(d)

Investment fees

(1)

In general

The Secretary of Labor and the Secretary, in consultation with the Chairman of the Securities and Exchange Commission, shall include in the regulations under subsection (c)(1)—

(A)

clear and uniform methods for reporting the fees imposed with respect to the investment options provided under subsection (c), and

(B)

a prohibition on charging additional fees solely on the basis that the balance in an automatic IRA is small.

(2)

Availability

The Secretary shall provide for the information described in paragraph (1)(A) to be furnished or made available to employers and employees, and included on the Internet website established under section 440, in such a manner that employers and employees will be able to easily compare fees of all providers under the various investment options.

(3)

Fees

For purposes of this subsection, the term fee includes any fee, commission, asset management charge, compensation for services, or any other charge or expense specified in the regulations described in paragraph (1) which is imposed with respect to the automatic IRA.

440.

Rules relating to choice of investment providers

(a)

In general

The Secretary shall establish a program to assist in the implementation of this part. Such program shall include—

(1)

the establishment of an Internet website meeting the requirements of subsection (b),

(2)

the establishment of an arrangement meeting the requirements of subsection (c) for the default assignment of automatic IRA providers to employers, and

(3)

procedures for record keepers, multiple employer arrangements, and other intermediaries described in section 440(e) to administer any automatic IRA arrangement of an employer required under this section.

(b)

Internet website

(1)

In general

The Secretary shall develop an Internet website or other electronic means by which—

(A)

employers can obtain information on automatic IRA arrangements, including the required notices and forms described in section 438(e)(3)(C),

(B)

providers of automatic IRAs may register for inclusion in a list of providers of automatic IRAs from which employers may designate for purposes of section 438(g)(1)(A),

(C)

employers may elect to have contributions under an automatic IRA arrangement made to a provider selected under the default provider program established under subsection (c), and

(D)

employers may elect to have contributions under an automatic IRA arrangement made to the retirement bond program established under subsection (d).

(2)

Registration

A provider seeking to register under paragraph (1)(B) shall provide such information as the Secretary may require in order to ensure that an employer may easily compare and select a provider from among providers that serve the employer's geographic area and that are appropriate for the employer taking into account other relevant characteristics of the employer.

(3)

Secretary may limit registration

The Secretary—

(A)

may by regulation provide standards for inclusion on the website list described in paragraph (1)(B), and

(B)

shall establish procedures for a provider to certify that it meets those standards.

(c)

Default assignment of automatic IRA providers

(1)

In general

The Secretary shall include in the program under subsection (a) an arrangement under which employers electing under section 438(g)(1)(B) to be included in the program would be randomly assigned a provider from the participating providers selected under paragraph (2) to establish automatic IRAs for its employees under the automatic IRA arrangement.

(2)

Establishment

The Secretary, through a competitive process, shall select providers of automatic IRAs for participation in the arrangement under this subsection from among providers who apply for inclusion in such arrangement. The Secretary shall select such providers, and the number of such providers, taking into account—

(A)

the extent of the provider's willingness to accept all employers that are in the geographic area the provider serves, that elect to participate in the arrangement under paragraph (1), and that are randomly assigned to the provider,

(B)

the investment options offered through the provider's automatic IRA, particularly the value such options offer to participants (taking into account the relative fees), and

(C)

whether or not inclusion of the provider will avoid concentration of assets in too few providers.

(3)

Alternate arrangement

The Secretary may establish an alternate arrangement to carry out the responsibilities of the participating providers under this subsection if the Secretary determines such arrangement would reduce administrative costs and burdens.

(d)

Retirement bond program

(1)

In general

The Secretary shall include in the program under subsection (a) an arrangement under which—

(A)

employers may elect for purposes of section 438(g)(1)(C) to have all payments described in section 438(c)(1) with respect to a qualifying employee be deposited for investment in a retirement bond described in paragraph (3) in the name of such qualifying employee, and

(B)

if the value of the retirement bond as of the time specified in clause (i) of section 438(d)(3)(A) exceeds the amount specified in such clause, the Secretary shall, unless otherwise directed by the qualifying employee after receiving written notice, redeem such bond and transfer the proceeds from such redemption (and any subsequent deposits described in subparagraph (A)) to the blended investment option of the automatic IRA described in section 439(c)(2)(B) established for such employee by a provider selected under subsection (c) as the provider for employees of that employer.

(2)

Details of arrangement

(A)

Simplification

The Secretary shall ensure that under the arrangement no more than 1 retirement bond of each type (traditional or Roth) is issued for each TIN and that contributions may be applied to the purchase of retirement bonds without undue administrative or paperwork requirements.

(B)

Treatment of contributions

For purposes of this title—

(i)

any payment invested under the arrangement shall be treated as if it were contributed to and held under an individual retirement plan established on behalf of the employee and as if the provider of the individual retirement plan were described in section 408(a)(2), and

(ii)

for purposes of section 408(d)(3)(B), the transfer under paragraph (1)(B) or subparagraph (C) shall be disregarded.

(C)

Forwarding of certain payments

If—

(i)

an employer has elected to make contributions to the Secretary, and

(ii)

either—

(I)

an employee has designated a provider to receive automatic payroll deduction contributions, or

(II)

the Secretary has transferred the proceeds of a redeemed retirement bond to the provider selected under the procedures under paragraph (1)(B),

then the Secretary shall periodically forward the amount contributed to the designated or selected provider.
(D)

Notice

The Secretary shall provide notice to a qualifying employee within a reasonable period before a redemption under paragraph (1)(B) that informs the employee of the option to direct the Secretary not to redeem such bond or to transfer the proceeds of the redemption to an individual retirement plan of a provider selected by the employee.

(3)

Retirement bonds

For purposes of this subsection, the term retirement bond means a bond issued under chapter 31 of title 31, which by its terms, or by regulations or other guidance prescribed by the Secretary under such chapter—

(A)

provides for interest to be credited at rates that take into account the expected duration of the funds invested in retirement bonds,

(B)

provides for the interest to be determined or adjusted in a manner and with sufficient frequency to provide substantial protection from inflation,

(C)

is designed for investment under an automatic IRA, and

(D)

is not transferable.

(e)

Alternative structures

(1)

In general

The Secretary may, under the program established under subsection (a), establish procedures under which the responsibilities for implementing an automatic IRA arrangement under this part may be carried out through—

(A)

record keepers (including persons performing recordkeeping services in connection with their investment products, payroll processors, or payroll software providers) that meet such requirements as the Secretary and the Secretary of Labor may establish and that contract with providers of automatic IRAs,

(B)

sponsors of arrangements involving multiple employers, or

(C)

other intermediaries authorized by the Secretary and the Secretary of Labor.

(2)

Other rules

(A)

Bonding

The requirements under paragraph (1)(A) may include bonding requirements similar to the requirements under section 412 of the Employee Retirement Income Security Act of 1974 for persons who handle money or other property of automatic IRAs.

(B)

Separate accounts

For purposes of this part, each separate account under a trust created or organized in the United States by a person described in paragraph (1) or a provider of an automatic IRA shall, except to the extent provided by the Secretary, be treated as an individual retirement account described in section 408(a) if the trust would be described in section 408(c) had it been created or organized by an employer.

(3)

Rule of construction

Nothing in this subsection shall be construed to prohibit a person described in paragraph (1) that otherwise qualifies as a trustee or issuer of an automatic IRA from registering for inclusion in the list described in subsection (b)(1)(B) or participating in the competitive process under subsection (c)(2).

.

(b)

Notice of availability of investment guidelines

Section 408(i) of the Internal Revenue Code of 1986 (relating to reports) is amended by adding at the end the following new sentence: Any report furnished under paragraph (2) to an individual shall include notice of the availability of, and methods of acquiring, the basic investment guidelines prepared by the Secretary of Labor..

(c)

Development of basic investment guidelines

(1)

In general

The Secretary of Labor shall, in consultation with the Secretary of the Treasury, develop and publish basic guidelines for investing for retirement. Except as otherwise provided by the Secretary of Labor, such guidelines shall include—

(A)

information on the benefits of diversification,

(B)

information on the essential differences, in terms of risk and return, between various pension plan investments, including stocks, bonds, mutual funds, and money market investments,

(C)

information on how an individual’s pension plan investment allocations may differ depending on the individual’s age and years to retirement and on other factors determined by the Secretary of Labor,

(D)

sources of information where individuals may learn more about pension rights, individual investing, and investment advice, and

(E)

such other information related to individual investing as the Secretary of Labor determines appropriate.

(2)

Calculation information

The guidelines under paragraph (1) shall include addresses for Internet sites and worksheets which a participant or beneficiary in a pension plan may use to calculate—

(A)

the retirement age value of the participant’s or beneficiary’s nonforfeitable pension benefits under the plan (expressed as an annuity amount and determined by reference to varied historical annual rates of return and annuity interest rates), and

(B)

other important amounts relating to retirement savings, including the amount which a participant or beneficiary would be required to save annually to provide a retirement income equal to various percentages of current salary (adjusted for expected growth prior to retirement).

(3)

Public comment

The Secretary of Labor shall provide at least 90 days for public comment on proposed guidelines before publishing the final guidelines.

(4)

Rules relating to guidelines

The guidelines under paragraph (1)—

(A)

shall be written in a manner calculated to be understood by the average plan participant, and

(B)

may be delivered in written, electronic, or other appropriate manner to the extent such manner would ensure that the guidelines are reasonably accessible to participants and beneficiaries.

(d)

Failure To provide access to automatic IRA arrangements

Chapter 43 of the Internal Revenue Code of 1986 (relating to qualified pension, etc., plans) is amended by adding at the end the following new section:

4980J.

Requirements for applicable employers to provide employees access to automatic IRA arrangements

(a)

General rule

There is hereby imposed a tax on any failure by an applicable employer (as defined in section 438(h)) to meet the requirements of section 438 for a calendar year.

(b)

Amount

(1)

In general

The amount of the tax imposed by subsection (a) on any failure for any calendar year shall be $100 with respect to each employee to whom such failure relates.

(2)

Tax not to apply where failure not discovered and reasonable diligence exercised

No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that the employer subject to liability for the tax did not know that the failure existed and exercised reasonable diligence to meet the requirements of section 438.

(3)

Tax not to apply to failures corrected 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 reasonable diligence to meet the requirements of section 438, and

(B)

the employer provides the automatic IRA arrangement described in section 438 to each employee eligible to participate in the arrangement by the end of the 90-day period beginning 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. The Secretary, in consultation with the Secretary of Labor, may establish a voluntary corrections program as part of the waiver authority under this paragraph.

(c)

Procedures for notice

The Secretary may prescribe and implement procedures for obtaining from employers confirmation that such employers are in compliance with the requirements of section 438. The Secretary, in the Secretary’s discretion, may prescribe that the confirmation shall be obtained on an annual or less frequent basis, and may use for this purpose the annual report or quarterly report for employment taxes, or such other means as the Secretary may deem advisable.

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(e)

Provisions relating to penalties

(1)

Penalty for failure timely to remit contributions to automatic ira arrangements

Section 4975(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(7)

Special rule for automatic IRA arrangements

For purposes of paragraph (1), if an employer is required under an automatic IRA arrangement under section 438 to deposit amounts withheld from an employee's compensation into a designated automatic IRA but fails to do so within the time prescribed under such arrangement, such amounts shall be treated as assets of the automatic IRA.

.

(2)

Waiver of early withdrawal penalty for certain distributions following initial election to participate in qualified automatic IRA arrangement

Subsection (t) of section 72 of such Code is amended by adding at the end the following new paragraph:

(11)

Distribution following initial election to participate in qualified automatic IRA arrangement

Paragraph (1) shall not apply in the case of a distribution to a qualifying employee made not later than 90 days after the initial election under section 438(c)(1)(A).

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(f)

Coordination with ERISA

(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 subparagraph (B) in subparagraph (A), and

(ii)

by adding at the end the following new subparagraph:

(C)

An automatic IRA arrangement described in section 438(c) of the Internal Revenue 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 a designated automatic IRA the provider of which is included on the website list established under section 440(b) of such Code, are to be made to an individual retirement plan pursuant to section 440(c), or are to be made to the Secretary of the Treasury for investment in retirement bonds pursuant to section 440(d).

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(B)

Customer identification program

Notwithstanding the amendment made by subparagraph (A), an individual retirement plan established pursuant to an automatic IRA arrangement described in section 438(c) of the Internal Revenue Code of 1986 shall, for purposes of any customer identification program established under section 5318(l) of title 31, United States Code, be treated as an account 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 before the last sentence: In the case of an automatic IRA designated by the employer under section 438 of such Code that is not exempt under section 3(2)(C), a participant 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 employee that such automatic IRA has been established on behalf of the employee., and

(B)

by inserting or with respect to an automatic IRA designated by an employer under section 438 of such Code after arrangement in the last sentence.

(g)

Preemption of conflicting State laws

Section 514(e) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1144(e)(1)) is amended by adding at the end the following:

(5)

Notwithstanding any other provision of this section, this title shall supersede any law of a State which would directly or indirectly prohibit or restrict the establishment or operation of an automatic IRA arrangement in accordance with section 438 of the Internal Revenue Code of 1986. Nothing in this title shall be construed to impair or supersede any State law to the extent it provides a remedy for the failure to make payments required under such arrangement within the required time period under such section 438.

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(h)

Mandatory transfers

Section 401(a)(31)(B) of the Internal Revenue Code of 1986 is amended by inserting (including an automatic IRA) after individual retirement plan each place it appears.

(i)

Automatic IRA Advisory Group

(1)

In general

Not later than 60 days after the date of enactment of this Act, the Secretary of the Treasury and the Secretary of Labor shall jointly establish an Automatic IRA Advisory Group (in this subsection referred to as the Advisory Group). The purpose of the Advisory Group shall be to make recommendations regarding requirements for the automatic IRA investment options and procedures described in section 439(c) of the Internal Revenue Code of 1986, including disclosure of information regarding fees and expenses and such other related matters as may be determined by the Secretaries.

(2)

Membership

The Advisory Group shall consist of not more than 15 members and shall be composed of—

(A)

such persons as the Secretaries of the Treasury and Labor may consider appropriate to provide expertise regarding investments for retirement, including providers of individual retirement accounts and individual retirement annuities described in section 408 or 408A of such Code; and

(B)

one or more representatives of the Department of Labor and of the Department of the Treasury.

(3)

Compensation

The members of the Advisory Group shall serve without compensation.

(4)

Administrative support

The Department of the Treasury and the Department of Labor shall jointly provide appropriate administrative support to the Advisory Group, including technical assistance. The Advisory Group may use the services and facilities of such Departments, with or without reimbursement, as jointly determined by such Departments.

(5)

Reports by advisory group

Not later than 12 months after the date of the enactment of this Act, the Advisory Group shall submit to the Secretary of Labor and the Secretary of the Treasury a report containing its recommendations. The Secretaries may request that the Advisory Group submit subsequent reports.

(j)

Conforming amendment

The table of parts for subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to part III the following new item:

Part IV. Automatic IRA arrangements

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(k)

Effective date

The amendments made by this section shall apply to calendar years beginning after December 31, 2011.

3.

Credit for small employers maintaining automatic IRA arrangements

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

45S.

Small employer automatic IRA credit

(a)

General rule

For purposes of section 38, in the case of an eligible employer maintaining an automatic IRA arrangement meeting the requirements of section 438 (without regard to whether the employer is required to maintain the arrangement), the small employer automatic IRA credit determined under this section for any taxable year is the amount determined under subsection (b).

(b)

Amount of credit

(1)

In general

The amount of the credit determined under this section for any taxable year with respect to an eligible employer shall be equal to the lesser of—

(A)

$25 multiplied by the number of qualifying employees (within the meaning of section 438(b)) for whom contributions are made under the automatic IRA arrangement referred to in subsection (a) for the calendar year in which the taxable year begins, or

(B)

$250.

(2)

Duration of credit

No credit shall be determined under this section for any taxable year other than a taxable year which begins during the first 2 calendar years in which the eligible employer maintains an automatic IRA arrangement meeting the requirements of section 438.

(3)

Coordination with small employer startup credit

No credit shall be allowed under this section to the employer for any taxable year if a credit is determined under section 45E with respect to the employer for the taxable year.

(c)

Eligible employer

For purposes of this section, the term eligible employer means, with respect to any calendar year in which the taxable year begins, an employer which maintains an automatic IRA arrangement meeting the requirements of section 438, which had no more than 100 employees on each day during the preceding calendar year, and which did not maintain a qualified plan or arrangement (as defined in section 438(i)) during any portion of the calendar year preceding the adoption of the automatic IRA arrangement or any portion of the 2 preceding calendar years.

(d)

Other rules

For purposes of this section, the rules of section 45E(e) shall apply.

.

(b)

Credit allowed as part of general business credit

Section 38(b) of the Internal Revenue Code of 1986 (defining current year business credit) is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by adding at the end the following new paragraph:

(37)

in the case of an eligible employer (as defined in section 45S(c)) maintaining an automatic IRA arrangement meeting the requirements of section 438, the small employer automatic IRA credit determined under section 45S(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. 45S. Small employer automatic IRA credit.

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(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2011.

4.

Promoting qualified plans

(a)

Increase in credit for small employer pension plan startup costs

(1)

In general

Section 45E(b)(1) of the Internal Revenue Code of 1986 is amended by striking $500 and inserting $1,000.

(2)

Effective date

The amendment made by this subsection shall apply to taxable years beginning after December 31, 2010.

(b)

Eliminating barriers to use of multiple employer plans

The Secretaries of the Treasury and Labor shall, within 12 months after the date of the enactment of this Act—

(1)

prescribe guidance establishing conditions under which an employer participating in a plan described in section 413(c) of the Internal Revenue Code of 1986 shall not have any liability under title I of the Employee Retirement Income Security Act of 1974 with respect to the acts or omissions of one or more other participating employers, which regulations may require that the portion of the plan attributable to such participating employers be spun off to plans maintained by such employers,

(2)

prescribe guidance establishing conditions under which a plan described in section 413(c) of such Code may be treated as satisfying the qualification requirements of sections 401(a) and 413(c) of such Code despite the violation of such requirements by one or more participating employers, including requiring, if appropriate, that the portion of the plan attributable to such participating employers be spun off to plans maintained by such employers, and

(3)

prescribe guidance providing simplified means, including a model plan document, by which plans described in section 413(c) of such Code may satisfy the requirements of sections 102, 103, and 105 of the Employee Retirement Income Security Act of 1974.

5.

Studies

(a)

Studies of spousal consent requirements and promotion of certain lifetime income arrangements

The Secretary of the Treasury and the Secretary of Labor shall jointly conduct a separate study of the feasibility and desirability of each of the following:

(1)

Extending to automatic IRAs spousal consent requirements similar to, or based on, those that apply under the Federal Employees’ Thrift Savings Plan, including consideration of whether modifications of such requirements are necessary to apply the requirements to automatic IRAs.

(2)

Promoting the use of low-cost annuities, longevity insurance, or other guaranteed lifetime income arrangements in automatic IRAs, including consideration of—

(A)

appropriate means of arranging for, or encouraging, individuals to receive at least a portion of their distributions in some form of low-cost guaranteed lifetime income, and

(B)

issues presented by possible additional differences in, or uniformity of, provisions governing different IRAs.

(b)

Study of consolidation of individual retirement plans

The Secretary of the Treasury and the Secretary of Labor shall jointly conduct a separate study of the feasibility and desirability of—

(1)

using data on investments in individual retirement accounts and annuities to enable individuals with multiple such accounts and annuities that include very small amounts to receive periodic notices informing them about the location of these accounts and how such accounts and annuities might be consolidated, and

(2)

using investment arrangements associated with automatic IRAs to assist in addressing the problem of abandoned accounts.

(c)

Report

Not later than 18 months after the date of the enactment of this Act, the Secretaries shall report the results of each study conducted under subsections (a) and (b), together with any recommendations for legislative changes, to the Committees on Finance and Health, Education, Labor, and Pensions of the Senate and the Committees on Ways and Means and Education and Labor of the House of Representatives.