[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3760 Introduced in Senate (IS)]
111th CONGRESS
2d Session
S. 3760
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.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
August 5, 2010
Mr. Bingaman (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.
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 ``Automatic IRA Act of 2010''.
SEC. 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:
``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.
``SEC. 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:
The applicable
number for the
``If the calendar preceding calendar
year is: year is:
2012......................................... 100
2013......................................... 50
2014......................................... 25
2015 or thereafter........................... 10.
``(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.
``SEC. 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.
``SEC. 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:
``SEC. 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.''.
(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).''.
(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).''.
(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.''.
(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''.
(k) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 31, 2011.
SEC. 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:
``SEC. 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.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2011.
SEC. 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.
SEC. 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.
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