[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6722 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 6722
To amend the Internal Revenue Code of 1986 to provide rules for
automatic contribution retirement plans and arrangements.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 15, 2025
Mr. Neal introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide rules for
automatic contribution retirement plans and arrangements.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS, ETC.
(a) Short Title.--This Act may be cited as the ``Automatic IRA Act
of 2025''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents, etc.
Sec. 2. Automatic contribution plan or arrangement.
Sec. 3. Credit for certain small employer automatic IRA arrangements.
Sec. 4. Treatment of automatic IRA arrangements under State law.
(c) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this subtitle an amendment or repeal is expressed
in terms of an amendment to, or repeal of, a section or other
provision, the reference shall be considered to be made to a section or
other provision of the Internal Revenue Code of 1986.
SEC. 2. AUTOMATIC CONTRIBUTION PLAN OR ARRANGEMENT.
(a) Automatic Contribution Plan or Arrangement.--
(1) In general.--Section 414 is amended by adding at the
end the following:
``(dd) Automatic Contribution Plan or Arrangement.--For purposes of
this title--
``(1) In general.--The term `automatic contribution plan or
arrangement' means--
``(A) a defined contribution plan that--
``(i) is described in clause (i), (ii), or
(iv) of section 219(g)(5)(A),
``(ii) includes a qualified cash or
deferred arrangement or a salary reduction
arrangement, and
``(iii) meets the notice, eligibility,
contribution, fee, and lifetime income
requirements of paragraphs (2), (3), (4), (6),
and (7), respectively,
``(B) an automatic IRA arrangement described in
paragraph (8),
``(C) an arrangement described in section 408(p)
that meets the notice, contribution, investment, and
fee requirements described in paragraphs (2), (4), (5),
(6), respectively, and
``(D) a plan described in clause (i), (ii), (iv),
(v), or (vi) of section 219(g)(5)(A) that is
established and maintained by an employer as of the
date of enactment of the Automatic IRA Act of 2025, or
a plan described in section 219(g)(5)(A)(iv) that is
not subject to title I of the Employee Retirement
Income Security Act of 1974 and offers annuity
contracts, or makes custodial accounts available to
employees, as of such date.
``(2) Notice requirements.--A plan or arrangement shall be
treated as meeting the notice requirements of this paragraph
with respect to an employee if the plan or arrangement meets
notice requirements similar to the notice requirements of
section 401(k)(13)(E).
``(3) Eligibility requirements.--
``(A) In general.--The requirements of this
paragraph shall be treated as met if all employees of
the employer are eligible to participate in an
automatic contribution plan or arrangement maintained
or facilitated by the employer.
``(B) Certain exclusions.--The following employees
may be excluded from consideration in determining
whether the requirements of this paragraph are met:
``(i) Individuals less than 21 years old.--
Any employee who has not attained age 21.
``(ii) Certain other employees.--Any
employee described in section 410(b)(3).
``(iii) Service requirements.--Any employee
who has completed neither of the following
periods of service with the employer
maintaining or facilitating the plan or
arrangement:
``(I) The period permitted under
section 410(a)(1) (determined without
regard to subparagraph (B)(i) thereof).
``(II) A period of 2 consecutive
12-month periods during each of which
the employee has at least 500 hours of
service.
For purposes of subclause (II), 12-month
periods shall be determined in the same manner
as under the last sentence of section
410(a)(3)(A).
``(iv) Certain students in case of a 403(b)
plans.--In the case of an annuity contract
described in section 403(b), employees who are
students, but only to the extent such employees
may be excluded under the last sentence of
403(b)(12)(A).
``(C) Special rules for controlled groups.--All
eligible employees of an employer need not be eligible
to participate in the same automatic contribution plan
or arrangement. For purposes of this subsection, the
term `employer' shall include all employers treated as
a single employer under subsection (b), (c), (m), or
(o) of section 414.
``(D) Entry dates.--Rules similar to the rules of
section 410(a)(4) shall apply with respect to employees
who have satisfied the age and service requirements
referenced in subparagraph (B) and who are otherwise
entitled to participate in a plan or arrangement.
``(E) Automatic iras for non-employees.--The
Secretary shall by regulation or other guidance provide
for making available automatic IRAs to individuals who
provide services that do not constitute employment.
``(4) Contribution requirements.--
``(A) In general.--The requirements of this
paragraph shall be treated as met if, under the plan or
arrangement, each employee eligible to participate in
the plan or arrangement is treated as having elected to
have the employer make elective contributions in an
amount equal to the qualified percentage of
compensation.
``(B) Election out.--The election treated as having
been made under subparagraph (A) shall cease to apply
with respect to any employee if such employee makes an
affirmative election--
``(i) not to have such contributions made,
or
``(ii) to make elective contributions at a
level specified in such affirmative election.
``(C) Qualified percentage.--For purposes of this
paragraph, and except as provided in subparagraph
(D)(i), the term `qualified percentage' means, with
respect to any employee, any percentage determined
under the plan or arrangement if such percentage is
applied uniformly, does not exceed 15 percent (10
percent during the period described in clause (i)), and
is at least--
``(i) 6 percent during the period beginning
on the date on which the first elective
contribution described in subparagraph (A) is
made with respect to such employee and ending
on the last day of the first plan year which
begins after such date,
``(ii) 7 percent during the first plan year
following the plan year described in clause
(i),
``(iii) 8 percent during the first plan
year following the plan year described in
clause (ii),
``(iv) 9 percent during the first plan year
following the plan year described in clause
(iii), and
``(v) 10 percent during any subsequent plan
year.
``(D) Rules relating to automatic IRA
arrangements.--For purposes of this paragraph--
``(i) Qualified percentage.--In the case of
an automatic IRA arrangement, the term
`qualified percentage' means, with respect to
an employee for any taxable year, a percentage
equal to the minimum percentage described for
the taxable year under subparagraph (C)
determined by substituting `taxable year of the
employee' for `the plan year' each place it
appears.
``(ii) Payroll deduction contributions.--In
the case of an automatic IRA arrangement, any
reference in this paragraph to elective
contributions shall be treated as including a
reference to payroll deduction contributions.
``(5) Investment requirements.--
``(A) In general.--
``(i) Default investments.--A plan or
arrangement shall be treated as meeting the
requirements of this paragraph if in the
absence of an investment election by a
participant or beneficiary, amounts are
invested only in the class of assets or funds
described in subparagraph (B).
``(ii) Required investment options in
automatic ira arrangement.--In addition to the
default investment requirement of clause (i),
an automatic IRA arrangement shall be treated
as meeting the requirements of this paragraph
if the arrangement provides the option of
investing in each of the classes of assets or
funds described in subparagraphs (B), (C), (D),
and (E), and no other investment options.
``(B) Target date/lifecycle option.--The class of
assets or funds described in this clause is the class
of assets or funds that constitutes an investment fund
product or model portfolio described in Department of
Labor regulation section 2550.404c-5(e)(4)(i).
``(C) Principal preservation.--The class of assets
or funds described in this clause is the class of
assets or funds that is designed to protect the
principal of the individual on an ongoing basis.
``(D) Balanced option.--The class of assets or
funds described in this clause is the class of assets
or funds that constitutes a qualified default
investment alternative under Department of Labor
regulation section 2550.404c-5(e)(4)(ii).
``(E) Other.--Any other class of assets or funds
determined by the Secretary to be a qualified
investment for purposes of this section.
``(6) Fee requirements.--In the case of any plan or
arrangement not otherwise subject to title I of the Employee
Retirement Income Security Act of 1974, under the fee
requirements of this paragraph, no participant, beneficiary,
employer, individual retirement account, plan, or arrangement
may be charged unreasonable fees or expenses.
``(7) Lifetime income requirements.--
``(A) In general.--Except in the case of a plan
maintained by an eligible employer (as defined in
section 408(p)(2)(C)(i)), a plan or arrangement shall
be treated as meeting the lifetime income requirement
described in this paragraph if the plan or arrangement
permits participants to elect to receive at least 50
percent of their vested account balance in a form of
distribution described in section 401(a)(38)(B)(iii).
``(B) Exception.--
``(i) In general.--This paragraph shall not
apply with respect to any participant whose
vested account balance is $200,000 or less at
the time of distribution.
``(ii) Not treated as discriminatory in
favor of highly compensated employees.--A plan
shall not be treated as failing to meet the
requirements of section 401(a)(4) solely by
reason of applying the exception of clause (i)
to the requirements of subparagraph (A).
``(8) Automatic ira arrangement.--
``(A) In general.--For purposes of this paragraph,
the term `automatic IRA arrangement' means, with
respect to an employer (and trustee or issuer
designated by the employer), an arrangement facilitated
by the employer which meets the requirements of this
paragraph and the contribution, investment, and fee
requirements of paragraphs (4), (5), and (6),
respectively, and under which an employee--
``(i) may elect--
``(I) to have the employer make
payroll deduction deposits on behalf of
the individual as payroll deduction
contributions to an individual
retirement account, or
``(II) to have such payments paid
to the employee directly in cash,
``(ii) is treated as having made the
election under clause (i)(I) at the level
determined under paragraph (4)(D) until the
individual makes an affirmative election not to
have such contributions made (or to have such
contributions made at a level specified in the
affirmative election), and
``(iii) may elect to modify prospectively
the level at which contributions are made and
the manner in which such contributions are
invested for such year.
``(B) Administrative requirements.--
``(i) Payments.--The requirements of this
paragraph shall not be treated as met with
respect to any automatic IRA arrangement unless
the employer makes the payments elected or
treated as elected under subparagraph (A)(i) on
or before the last day of the month following
the month in which the compensation otherwise
would have been payable to the employee in
cash.
``(ii) Notice of election period.--The
requirements of this paragraph shall not be
treated as met with respect to any year unless
the employer notifies each employee eligible to
participate, within a reasonable period of time
before the beginning of such year (and, for the
first year the employee is so eligible, a
reasonable period of time before the first day
such employee is so eligible), of--
``(I) the opportunity to elect to
have contributions made, or to be
treated as so electing, under clause
(i)(I), or (ii), of subparagraph (A),
``(II) the opportunity to elect not
to have payroll deduction contributions
made or to have such contributions made
at a different percentage or in a
different amount, and
``(III) the opportunity under
subparagraph (A)(iii) to modify the
manner in which such amounts are
invested for such year.
The employer shall provide such notice in paper
form or, if the employee so elects, in
electronic form.
``(C) Eligibility requirements.--
``(i) In general.--The requirements of this
paragraph shall not be treated as met with
respect to an automatic IRA arrangement
facilitated by the employer unless all
employees of the employer are eligible to
participate in the arrangement.
``(ii) Certain exclusions.--The following
employees may be excluded from consideration in
determining whether the requirements of this
paragraph are met:
``(I) Individuals less than 18
years old.--Any employee who has not
attained age 18.
``(II) Certain other employees.--
Any employee described in section
410(b)(3).
``(III) Service requirements.--Any
employee who has not completed at least
3 months of service with the employer
facilitating the arrangement.
``(iii) Special rules for controlled
groups.--For purposes of this subparagraph, all
eligible employees of an employer need not be
eligible to participate in the same
arrangement. For purposes of this clause, the
term `employer' shall include all employers
treated as a single employer under subsection
(b), (c), (m), or (o) of section 414.
``(iv) Automatic iras for non-employees.--
The Secretary shall by regulation or other
guidance provide for making available automatic
IRAs to individuals who provide services that
do not constitute employment.
``(D) Limits on contributions.--An employer shall
not be treated as failing to satisfy the requirements
of this section or any other provision of this title
merely because--
``(i) aggregate payroll deduction
contributions by or on behalf of an individual
to individual retirement accounts of the
individual exceed the deductible amount in
effect under section 219(b)(5) (determined
without regard to subparagraph (B) thereof) for
any taxable year in which any payroll deduction
contributions by the employer under an
automatic IRA arrangement are made, or
``(ii) the employer chooses to limit the
payroll deduction contributions under this
subsection on behalf of an employee for any
calendar year in a manner reasonably designed
to avoid exceeding such deductible amount.
``(E) Default treatment as roth ira.--An employee
on whose behalf payroll deduction contributions are
made to an individual retirement account under
subparagraph (A) may elect, at such time and in such
manner and form as the Secretary may prescribe, whether
to treat the individual retirement account as
designated as a Roth IRA. If no such election is made,
the account shall be treated as designated as a Roth
IRA.
``(F) Deposits to individual retirement accounts of
a designated trustee or issuer.--
``(i) In general.--An employer shall not be
treated as failing to satisfy the requirements
of this section, or any other provision of this
title, merely because the employer makes all
payroll deduction contributions on behalf of
all employees (or all employees who do not
specify an individual retirement account,
trustee, or issuer to receive the
contributions) to individual retirement
accounts specified in clause (ii).
``(ii) Individual retirement accounts other
than those selected by employee.--
``(I) In general.--An employer may
elect to have payroll deduction
contributions for all employees
participating in an automatic IRA
arrangement made to individual
retirement accounts of a trustee or
issuer under the arrangement that has
been designated by the employer, but
only if the provider of such accounts,
and the investments therein, are
identified on the website established
under subparagraph (G)(iii).
``(II) Notice.--Subclause (I) shall
not apply unless each participant is
notified in writing that the
participant may direct the
participant's balance be transferred
without cost or penalty to another
individual retirement account
established by or on behalf of the
participant. Such notice shall be in
paper form or, if the employee so
elects, electronic form.
``(iii) Employers may permit employee to
choose ira.--If the employer so elects, the
arrangement may provide for an employee
election to have payroll deduction
contributions made to any individual retirement
account specified by the employee.
``(iv) Regulations.--The Secretary may
issue such regulations as are necessary to
carry out the purposes of this subparagraph,
including establishment of procedures to assist
employers and individuals in connecting with
certified and available providers of individual
retirement accounts and to communicate to
individuals the importance of investment
diversification.
``(G) Model notice, etc.--The Secretary shall--
``(i) provide a model notice, written in a
manner calculated to be understandable to the
average worker, that is simple to use--
``(I) to notify employees of the
requirement under this section for the
employer to provide certain employees
with the opportunity to participate in
an automatic IRA arrangement, and
``(II) to satisfy the requirements
of subparagraph (B)(ii),
``(ii) provide model forms for enrollment,
including automatic enrollment, in an automatic
IRA arrangement,
``(iii) establish a website or other
electronic means that small employers and
individuals can access and use to obtain
information on automatic IRA arrangements
(including clear, standardized, easy-to-compare
information on fees and expenses, investment
options and returns, and defaults in a format
prescribed by the Secretary) and to obtain
notices and forms, and
``(iv) establish a process--
``(I) for the provider of an
automatic IRA arrangement to
demonstrate to the Secretary that the
arrangement is described in this
paragraph and meets the requirements
specified in paragraph (1)(B), and
``(II) to certify any arrangement
that the Secretary determines so
demonstrates, to regularly monitor
compliance and update such
determinations and certifications, and
to list all arrangements so certified
on the website described in clause
(iii) as appropriate for use by
employers and participants.
The information referred to in clause (iii) shall be
provided in a manner designed to assist employers and
providers by facilitating the identification by
employers of private-sector providers of individual
retirement accounts, including the provider's
investment options, that are appropriate for use in
automatic IRA arrangements.
``(H) Certain state-based arrangements.--An
arrangement facilitated by an employer shall not fail
to be treated as an automatic IRA arrangement merely
because such arrangement is required, provided for,
facilitated, or otherwise offered, in whole or in part,
by a State (or a political subdivision, agency, or
instrumentality thereof).
``(I) Individual retirement account.--For purposes
of this paragraph, the term `individual retirement
account' shall have the meaning given such term by
section 408(a), except that such term shall include
individual retirement annuities (as defined in section
408(b)).''.
(2) Other rules applicable to automatic IRA arrangements.--
(A) Penalty for failure to timely remit
contributions to automatic ira arrangements.--Section
4975(c) is amended by adding at the end the following
new paragraph:
``(8) Special rule for automatic IRA arrangements.--For
purposes of paragraph (1), if an employer is required under an
automatic IRA arrangement (as defined in section 414(dd)(1)(B))
to deposit amounts withheld from an employee's compensation
into an individual retirement account (within the meaning of
section 414(dd)(8)(I)) but fails to do so within the time
prescribed under section 414(dd)(8)(B)(i), such amounts shall
be treated as assets of the individual retirement account.''.
(B) Waiver of early withdrawal penalty for certain
distributions following initial election to participate
in automatic ira arrangement.--Section 72(t) is amended
by adding at the end the following new paragraph:
``(12) Distribution following initial election to
participate in automatic ira arrangement.--Paragraph (1) shall
not apply in the case of a distribution--
``(A) to an individual from an individual
retirement account (within the meaning of section
414(dd)(8)(I)) that is part of an automatic IRA
arrangement (as defined in section 414(dd)(8)(A)), and
``(B) made not later than 90 days after the
individual is first treated under clause (ii) of
section 414(dd)(8)(A) as having made an election under
clause (i)(I) of such section.''.
(C) Automatic IRA advisory group.--
(i) In general.--Not later than 90 days
after the date of the enactment of this Act,
the Secretary of the Treasury shall establish
an Automatic IRA Advisory Group (hereinafter in
this subparagraph referred to as the ``Advisory
Group''). The purpose of the Advisory Group
shall be to make recommendations, advise, and
assist in the Secretary's implementation and
administration of paragraphs (5), (6), and (8)
of section 414(dd) of the Internal Revenue Code
of 1986 with respect to automatic IRA
arrangements in the best financial interest of
savers, including--
(I) the procedures and criteria for
the periodic certification, website
listing, and monitoring of arrangements
and investment options that meet the
requirements of those paragraphs,
(II) user-friendly disclosure
regarding investment returns and risks,
terms, fees, and expenses to facilitate
comparison,
(III) the use of low-cost
investment options,
(IV) the appropriate use of
electronic and paper methods to provide
notice and disclosure,
(V) any possible learnings or
efficiencies based on the Secretary's
procedures and experience in approving
nonbank individual retirement account
trustees, and
(VI) such other related matters as
may be determined by the Secretary.
(ii) Membership.--The Advisory Group shall
consist of not more than 15 members and shall
be composed of--
(I) such individuals as the
Secretary may consider appropriate to
provide expertise regarding the
financial needs and challenges of
lower- and middle-income households,
(II) at least one individual who is
an expert in retirement-related
consumer protections or who represents
the general public, and
(III) at least one representative
of the Department of the Treasury.
(iii) Compensation.--The members of the
Advisory Group shall serve without
compensation.
(iv) Administrative support.--The
Department of the Treasury shall provide
appropriate administrative support to the
Advisory Group, including technical assistance.
The Advisory Group may use the services and
facilities of such Department, with or without
reimbursement, as determined by such
Department.
(v) Report by advisory group.--Not later
than 1 year after the date of the enactment of
this Act, the Advisory Group shall submit to
the Secretary of the Treasury a report
containing its recommendations. The Secretary
may request that the Advisory Group submit
subsequent reports.
(3) Conforming amendment relating to qualified cash or
deferred arrangements.--Section 401(k)(15)(B)(i) is amended by
inserting ``or section 414(dd)(3)(B)(iii)(II)'' after
``paragraph (2)(D)(ii)'' in the matter preceding subclause (I)
thereof.
(b) Excise Tax for Failure to Maintain or Facilitate Automatic
Contribution Plans or Arrangements.--
(1) In general.--Chapter 43 is amended by adding at the end
the following new section:
``SEC. 4980J. FAILURE TO MAINTAIN OR FACILITATE AUTOMATIC CONTRIBUTION
PLANS OR ARRANGEMENTS.
``(a) General Rule.--
``(1) In general.--There is hereby imposed a tax on the
failure of an employer to maintain or facilitate an automatic
contribution plan or arrangement.
``(2) Exception for arrangements under qualified state
law.--Paragraph (1) shall not apply to an employer to the
extent such employer facilitates an arrangement described in
subsection (f)(3)(B) under a qualified State law.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to an employee shall
be $10 for each day in the noncompliance period with respect to
such failure.
``(2) Noncompliance period.--For purposes of this section,
the term `noncompliance period' means, with respect to any
failure, the period--
``(A) beginning on the date such failure first
occurs, and
``(B) ending on the earlier of--
``(i) the date such failure is corrected,
or
``(ii) with respect to any employer, the
date that is 3 months after the last date on
which the employee is required to be eligible
to participate in an automatic contribution
plan or arrangement maintained or facilitated
by such employer.
``(3) Adjustment for inflation.--
``(A) In general.--In the case of any failure
relating to maintaining or facilitating a plan or
arrangement in a calendar year beginning after 2028,
the $10 amount under paragraph (1) shall be increased
by an amount equal to such dollar amount multiplied by
the cost-of-living adjustment determined under section
1(f)(3) for the calendar year determined by
substituting `calendar year 2027' for `calendar year
2016' in subparagraph (A)(ii) thereof.
``(B) Rounding.--If any amount adjusted under
subparagraph (A) is not a whole dollar amount, such
amount shall be rounded to the nearest whole dollar
amount.
``(c) Limitations on Amount of Tax.--
``(1) Tax not to apply where failure not discovered
exercising reasonable diligence.--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 none of
the persons referred to in subsection (e) knew, nor exercising
reasonable diligence would have known, that such failure
existed.
``(2) Tax not to apply to failures corrected within 9\1/2\
months.--No tax shall be imposed by subsection (a) on any
failure if--
``(A) such failure was due to reasonable cause and
not to willful neglect, and
``(B) such failure is corrected during the 9\1/2\-
month period beginning on the first date any of the
persons referred to in subsection (e) knew that such
failure existed, or exercising reasonable diligence
would have known.
``(3) Overall limitation for unintentional failures.--In
the case of failures which are due to reasonable cause and not
to willful neglect--
``(A) General rule.--The tax imposed by subsection
(a) for failures during the taxable year of the
employer shall not exceed $500,000.
``(B) Taxable years in the case of certain
controlled groups.--For purposes of this subparagraph,
if not all persons who are treated as a single employer
for purposes of this section have the same taxable
year, the taxable years taken into account shall be
determined under principles similar to the principles
of section 1561.
``(4) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax would
be excessive relative to the failure involved.
``(d) Tax Not to Apply in Certain Cases.--This section shall not
apply in the case of--
``(1) any employer that employed no more than 10 employees
each of whom received at least $5,000 of compensation from the
employer during the prior calendar year,
``(2) any employer with respect to a governmental plan
(within the meaning of section 414(d)),
``(3) any employer with respect to a church plan (within
the meaning of section 414(e)), or
``(4) any employer that has been in existence for fewer
than 2 years, taking into account all predecessor employers.
``(e) Liability for Tax.--The employer shall be liable for the tax
imposed by subsection (a) on a failure. All employers, determined
without regard to subsection (f)(2), shall be jointly and severally
liable for the liability of any other employer with which they are
aggregated under subsection (f)(2).
``(f) Definitions and Special Rules.--For purposes of this
section--
``(1) Automatic contribution plan or arrangement.--The term
`automatic contribution plan or arrangement' has the meaning
given such term under section 414(dd), and
``(2) Employer.--The term `employer' includes all employers
treated as a single employer under subsection (b), (c), (m), or
(o) of section 414.
``(3) Qualified state law.--The term `qualified State law'
means a State law (as it may be amended from time to time)
that--
``(A) was enacted before January 1, 2028, and
``(B) requires certain employers to facilitate an
automatic IRA arrangement pursuant to a payroll
deduction savings program of the State.
``(4) Treatment of professional employer organizations and
their customers.--
``(A) In general.--In the case of an employer who
under a qualified service contract is a customer of a
professional employer organization with respect to an
employee who performs services for the customer under
such contract--
``(i) such customer shall be treated as the
employer (and such professional employer
organization shall not) with respect to such
employee, and
``(ii) any automatic contribution plan or
arrangement maintained or facilitated by such
professional employer organization with respect
to such employee shall be treated as maintained
or facilitated, as the case may be, by the
customer.
``(B) Qualified service contract.--For purposes of
this paragraph, the term `qualified service contract'
means a service contract that meets the requirements of
section 7705(e)(2). For purposes of the preceding
sentence, the requirements of such section shall be
determined without regard to the term `certified'
therein, subparagraph (F) thereof, and whether the
professional employer organization with respect to such
contract is a certified professional employer
organization under section 7705.''.
(2) Clerical amendment.--The table of sections for chapter
43 is amended by adding at the end the following new item:
``Sec. 4980J. Failure to maintain or facilitate automatic contribution
plans or arrangements.''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2027.
SEC. 3. CREDIT FOR CERTAIN SMALL EMPLOYER AUTOMATIC IRA ARRANGEMENTS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
is amended by adding at the end the following new section:
``SEC. 45BB. CREDIT FOR CERTAIN SMALL EMPLOYER AUTOMATIC IRA
ARRANGEMENTS.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible employer, the small employer automatic IRA arrangement credit
determined under this section for any taxable year in the credit period
is $500.
``(b) Definitions.--For purposes of this section--
``(1) Eligible employer.--The term `eligible employer'
means, with respect to the calendar year in which the taxable
year begins, an employer which--
``(A)(i) facilitates an automatic IRA arrangement
(as defined in section 414(dd)(8)), or an arrangement
described in 4980J(a)(2), and
``(ii) is described in 408(p)(2)(C)(i), and
``(B) did not maintain an eligible employer plan
during the portion of the calendar year preceding the
commencement of such arrangement and the 2 preceding
calendar years.
``(2) Credit period.--The term `credit period' means the
first 3 calendar years beginning after the date of the
enactment of this section in which the eligible employer
participates in the arrangement.
``(3) Eligible employer plan.--The term `eligible employer
plan' means a qualified employer plan within the meaning of
section 4972(d).
``(c) Other Rules.--For purposes of this section, rules similar to
the rules of section 45E(e)(2) shall apply.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) is amended by striking ``plus'' at the end of paragraph (40), by
striking the period at the end of paragraph (41) and inserting ``,
plus'', and by adding at the end the following new paragraph:
``(42) the small employer automatic IRA arrangement credit
determined under section 45BB(a).''.
(c) Specified Credit for Purposes of Certified Professional
Employer Organizations.--Section 3511(d)(2) of such Code is amended by
redesignating subparagraphs (G), (H), and (I) as subparagraphs (H),
(I), and (J), respectively, and by inserting after subparagraph (F) the
following new subparagraph:
``(G) section 45BB (small employer automatic IRA
arrangement credit),''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following new item:
``Sec. 45BB. Credit for certain small employer automatic IRA
arrangements.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 4. TREATMENT OF AUTOMATIC IRA ARRANGEMENTS UNDER STATE LAW.
(a) Preemption of State Law.--This Act, and the amendments made
thereby, shall supersede any law of a State which would directly or
indirectly prohibit or restrict an automatic IRA arrangement (as
defined in section 414(dd)(8) of the Internal Revenue Code of 1986).
(b) Employers Maintaining Automatic IRA Arrangement.--
(1) In general.--Any employer maintaining such an
arrangement shall not be subject to any requirement imposed by
a State or political subdivision thereof to facilitate a
payroll deduction savings program of a State or political
subdivision thereof.
(2) Qualified state law exception.--Paragraph (1) shall not
apply with respect to any employer to the extent that such
employer facilitates an arrangement under a qualified State law
(as defined in section 4980J(f)(3) of the Internal Revenue Code
of 1986) for employees with respect to whom such qualified
State law applies.
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