,,ii #aafth ,,congress #ast ,session ,s4 #bcgj ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #ca1 #bjai,mr4 ,whitehouse introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to expand personal saving and retirement savings coverage by enabling employees not covered by qualifying retirement plans to save for retirement through automatic ,,ira arrangements1 and for other purposes4 #a4 ,short title2 reference 7a7 ,short title ,this ,act may be cited as the ,automatic ,,ira ,act of #bjai4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 #b4 ,qualifying automatic ,,ira arrangements 7a7 ,in general ,subpart ,a of part ,i of subchapter ,d of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #djh;,a the following new section3 #djh;,b4 ,qualifying automatic ,,ira arrangements 7a7 ,in general ,for purposes of this section1 a qualifying automatic ,,ira arrangement is an automatic ,,ira arrangement which is offered by a covered employer to each qualifying employee of the employer4 7b7 ,covered employer ,for purposes of this section-- 7#a7 ,in general ,except as otherwise provided in this subsection or subsection 7c77#b71 the term covered employer means1 with respect to any year1 an employer which does not maintain a qualifying plan or arrangement described in section #bai7;g77#e7 for the calendar year4 7#b7 ,excluded plans ,a qualifying plan or arrangement shall not be taken into account for purposes of paragraph 7#a7 if-- 7,a7 the plan or arrangement is frozen as of the first day of the preceding calendar year1 or 7,b7 in the case of a plan or arrangement under which the only contributions are discretionary on the part of the employer or other plan sponsor-- 7i7 no employer contribution has been made to the plan or arrangement for the #c-plan-year period ending with the last plan year ending in the preceding calendar year1 and 7ii7 it is not reasonable to assume that an employer contribution will be made for the last plan year ending in the preceding calendar year4 7#c7 ,exception for certain small and new employers 7,a7 ,in general ,the term covered employer does not include an employer for a calendar year if the employer-- 7i7 did not employ more than #aj employees who received at least #e1jjj of compensation 7as defined in section #cdja7;a77 from the employer for the preceding calendar year1 7ii7 did not normally employ more than #aj employees on a typical business day of the preceding calendar year1 or 7iii7 was not in existence at all times during the calendar year and the preceding calendar year4 7,b7 ,operating rules ,in determining the number of employees for purposes of subparagraph 7,a7-- 7i7 rules consistent with any rules applicable in determining the number of employees for purposes of section #djh7p77#b77;,c7 and section #dihj;,b7d7 shall apply1 7ii7 all members of the same family 7within the meaning of section #cah7;a77#a77 shall be treated as #a individual1 and 7iii7 any reference to an employer shall include a reference to any predecessor employer4 7#d7 ,exception for governments and churches ,the term covered employer does not include-- 7,a7 a government or entity described in section #dad7;d71 or 7,b7 a church or a convention or association of churches which is exempt from tax under section #eja4 7#e7 ,coordination with qualifying ,state-facilitated automatic ,,ira programs 7,a7 ,in general ,in the case of an employer all of the employees of which are employed in a single ,state1 if such ,state maintains or facilitates a qualifying ,state-facilitated automatic ,,ira program1 any employer which is required to participate in such ,state program is not a covered employer for purposes of this section4 7,b7 ,employers with employees in multiple ,states ,in the case of an employer which employs employees in more than #a ,state-- 7i7 if each such ,state maintains or facilitates a qualifying ,state-facilitated automatic ,,ira program1 the employer participation rules of each such program 7and of subparagraph 7,a77 apply1 respectively1 to employees employed in such ,state1 and 7ii7 if one or more of such ,states1 but not all1 maintain or facilitate a qualifying ,state-facilitated automatic ,,ira program-- 7,i7 the employer participation rules of each such program 7and of subparagraph 7,a77 apply1 respectively1 to employees employed in such ,state1 and 7,,ii7 the employer is a covered employer for purposes of this section with respect to qualifying employees employed in ,states which do not maintain or facilitate such a program 7unless otherwise excluded under paragraph 7#c77;,a771 unless the employer makes an irrevocable election to be treated as a covered employer for purposes of this section with respect to all qualifying employees in all ,states4 7#f7 ,aggregation rule ,all persons treated as a single employer under subsection 7a7 or 7b7 of section #eb or subsection 7m7 or 7o7 of section #dad shall be treated as a single employer4 7c7 ,qualifying employee ,for purposes of this section-- 7#a7 ,in general ,the term qualifying employee means any employee of the employer other than-- 7,a7 an excluded employee1 and 7,b7 an employee who participates in 7or is eligible to1 and has elected not to1 participate in7 a qualifying ,state-facilitated automatic ,,ira4 7#b7 ,plan sponsor's employees ,if-- 7,a7 an employer maintains one or more qualifying plans or arrangements described in section #bai7;g77#e71 7,b7 the employees of any subsidiary1 division1 or other major business unit of the employer are generally not eligible to participate in any such qualifying plan or arrangement1 and 7,c7 the number of employees of the employer described in subparagraph 7,b7 for a calendar year is-- 7i7 at least #ej1 and 7ii7 at least #aj percent of the employees of the employer 7other than excludable employees71 then1 for purposes of this section1 the employer shall be treated as a covered employer with respect to such employees 7other than excluded employees7 for the calendar year1 and such employees 7other than excluded employees7 shall be treated as qualifying employees4 7#c7 ,excluded employees 7,a7 ,in general ,the term excluded employee means an employee of the employer who is an excludable employee and who is in a class or category that the employer elects to exclude from treatment as qualifying employees4 7,b7 ,excludable employee ,the term excludable employee means-- 7i7 any employee described in section #daj7;b77#c71 7ii7 any employee who has not attained the age of #ah before the first day of the calendar year1 7iii7 any employee who has not completed at least #c months of service with the employer1 7iv7 in the case of an employer that maintains a qualifying plan or arrangement which excludes employees who have not satisfied the minimum age and service requirements for participation in the plan1 any employee who has not satisfied such requirements1 7v7 in the case of an employer that maintains a section #djc7;b7 annuity contract 7including a custodial account or retirement income account71 any employee who is permitted to be excluded from any salary reduction arrangement under the contract pursuant to section #djc7;b77#ab71 7vi7 in the case of an employer that maintains an arrangement described in section #djh7p71 any employee who is not required to be eligible to participate in the arrangement under section #djh7p77#d71 and 7vii7 in the case of an employer that maintains a simplified employee pension described in section #djh7k71 any employee who is permitted to be excluded from participation under section #djh7k77#b74 7#d7 ,guidance ,the ,secretary shall issue regulations or other guidance to carry out this subsection1 including-- 7,a7 guidelines for determining the classes or categories of employees to be covered by an automatic ,,ira arrangement1 7,b7 if an employer excludes employees from the automatic ,,ira arrangement1 guidelines providing that the employer shall specify the classification or categories of employees who are so excluded1 and 7,c7 rules to prevent avoidance of the requirements of this section4 7d7 ,automatic ,,ira arrangement ,for purposes of this section-- 7#a7 ,in general ,the term automatic ,,ira arrangement means an arrangement of an employer 7determined without regard to whether the employer is required to maintain the arrangement7-- 7,a7 under which a qualifying employee-- 7i7 may elect-- 7,i7 to contribute to an individual retirement plan1 or to purchase a qualifying retirement bond1 by having the employer deposit payroll deduction amounts or make other periodic direct deposits 7including electronic payments7 to the plan or invest such amounts in such qualifying retirement bonds1 or 7,,ii7 to have such payments paid to the employee directly in cash1 7ii7 is treated as having made the election under clause 7i77,i7 in the amount specified in paragraph 7#e7 until the individual specifically elects not to have such contributions or purchases made 7or specifically elects to have such contributions or purchases made at a different percentage or in a different amount71 and 7iii7 may elect to modify the manner in which such amounts are invested for such year1 7,b7 which meets the administrative requirements of paragraph 7#c71 including the notice requirement of paragraph 7#c77;,c71 and 7,c7 which does not charge unreasonable additional fees solely on the basis that the balance in an automatic ,,ira is small4 7#b7 ,employer's ,option to ,obtain ,affirmative ,elections from ,employees ,instead of ,automatic ,enrollment ,as an alternative to automatic enrollment1 an employer may choose to comply with paragraph 7#a77;,a77ii7 by notifying employees that the employer wishes to obtain from each qualifying employee an affirmative election either to contribute or not to contribute to an automatic ,,ira1 provided that any qualifying employee who fails to make such an election is treated in the manner provided under paragraph 7#a77;,a77ii74 7#c7 ,administrative requirements 7,a7 ,payments ,the requirements of this paragraph are met with respect to any automatic ,,ira arrangement if the employer makes the payments elected or treated as elected under paragraph 7#a77;,a7-- 7i7 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 cash1 7ii7 before such later deadline prescribed by the ,secretary for making such payments1 but not later than the due date for the deposit of tax required to be deducted and withheld under chapter #bd 7relating to collection of income tax at source on wages7 for the payroll period to which such payments relate1 or 7iii7 as early as administratively practicable4 7,b7 ,termination of employee participation ,subject to a requirement for reasonable notice1 an employee may elect to terminate participation in the arrangement at any time during a calendar year1 except that if an employee so terminates1 the arrangement may provide that the employee may not elect to resume participation until the beginning of the next calendar year4 7,c7 ,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 participate1 within a reasonable period of time before the #cjth day before the beginning of such year 7and1 for the first year the employee is so eligible1 the #cjth day before the first day such employee is so eligible71 of-- 7i7 the payments that may be elected or treated as elected under paragraph 7#a77;,a71 7ii7 the opportunity to make the election to terminate participation in the arrangement under subparagraph 7,b71 7iii7 the opportunity to make the election under paragraph 7#a77;,a77ii7 to have contributions or purchases made at a different percentage or in a different amount1 and 7iv7 the opportunity under paragraph 7#a77;,a77iii7 to modify the manner in which such amounts are invested for such year4 7,d7 ,investment options ,the requirements of this paragraph shall not be treated as met with respect to any year unless an employee electing to have contributions made to an individual retirement plan is provided with the option to choose among all investment options described in subparagraphs 7,b71 7,c71 7,d71 and 7,e7 of paragraph 7#f74 7#d7 ,default investments ,if an employee is treated under clause 7ii7 of paragraph 7#a77;,a7 as having made an election to participate in an automatic ,,ira arrangement-- 7,a7 the employee shall be deemed to have made an election to make contributions and payments in the amount determined under such clause1 and 7,b7 such contributions shall-- 7i7 be transferred to an individual retirement plan of the designated trustee or issuer1 but only if the contributions are invested as provided in paragraph 7#f71 or 7ii7 be applied toward the purchase of a qualifying retirement bond4 7#e7 ,amount of contributions and payments 7,a7 ,in general ,the amount specified in this paragraph with respect to any employee is-- 7i7 #c percent of the compensation of the employee1 or 7ii7 such other percentage of compensation as is specified in regulations prescribed by the ,secretary which is not less than #b percent or more than #f percent4 7,b7 ,authority to provide for periodic increases ,in the case of qualifying employees under an automatic ,,ira arrangement for #b or more consecutive years1 the ,secretary may by regulation provide for periodic 7not more frequent than annual7 increases in the percentage of compensation an employee is deemed to have elected under subparagraph 7,a74 ,the considerations the ,secretary shall take into account in issuing any regulations under this subparagraph and subparagraph 7,a7 shall include the potential effects on lower-income employees as well as on adequacy of savings4 7,c7 ,permitted additional procedures to limit contributions ,an employer-- 7i7 shall have no responsibility for any calendar year for determining whether1 or ensuring that1 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 #bai7;b77#e7 7determined without regard to subparagraph 7,b7 thereof71 and 7ii7 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 amount4 7#f7 ,required investments 7,a7 ,in general ,amounts contributed under paragraph 7#d77;,b77i7 shall be invested only in the class of assets or funds described in subparagraph 7,b7 unless the employee elects a class of assets or funds described in subparagraph 7,c71 7,d71 or 7,e74 7,b7 ,target date or lifecycle option ,the class of assets or funds described in this subparagraph is the class of assets or funds that constitutes a qualified default investment alternative under section #beej4djd;c-#e7;e77#d77;i7 of title #bi1 ,code of ,federal ,regulations4 7,c7 ,principal preservation ,the class of assets or funds described in this subparagraph is the class of assets or funds that is designed to protect the principal of the individual on an ongoing basis1 including passbook savings1 certificates of deposit1 insurance contracts1 mutual funds1 ,united ,states savings bonds 7which may be indexed for inflation71 and similar assets specified in regulations4 7,d7 ,guaranteed lifetime income option or equivalent ,the class of assets or funds described in this subparagraph is the class of assets or funds that is designed to provide an employee with the right to elect to receive distributions as a defined level of income annually 7or more frequently7 for at least the remainder of the life of the employee or the joint lives of the employee and the employee's designated beneficiary4 7,e7 ,other ,any other class of assets or funds determined by the ,secretary to be a qualified investment for purposes of this section4 7#g7 ,qualifying retirement bond ,for purposes of this section-- 7,a7 ,in general ,the term qualifying retirement bond means a bond issued under chapter #ca of title #ca1 ,united ,states ,code1 which by its terms1 or by regulations prescribed by the ,secretary under such chapter-- 7i7 provides for interest to be credited at rates that take into account the expected duration of the funds invested in such bonds and at rates determined or adjusted in a manner and with sufficient frequency to provide substantial protection from inflation1 7ii7 is not transferable1 and 7iii7 is designed for investment for retirement under automatic ,,ira arrangements or other savings vehicles4 7,b7 ,individual retirement plan rules applicable ,the provisions of this title applicable to an individual retirement plan 7as defined in section #ggja7;a77#cg771 including provisions relating to contributions1 holding and distributions1 shall apply to a qualifying retirement bond1 except as determined by the ,secretary4 7,c7 ,annual statement ,as soon as practicable after the close of each calendar year1 the ,secretary shall make available an annual statement to each participant on behalf of whom qualifying retirement bonds have been purchased1 setting forth-- 7i7 payments made by or on behalf of the participant for such bonds during such calendar year1 7ii7 amounts earned by any such bonds1 whether purchased during such year or during a prior year1 during such calendar year1 7iii7 the value of the participant's account with respect to such bonds as of the close of such calendar year1 7iv7 the importance of diversifying retirement savings1 7v7 the benefits of a well-balanced and diversified investment portfolio1 7vi7 a notice of the internet website of the ,department of ,labor for sources of information on individual investing and diversification1 7vii7 the procedures for redeeming a qualifying retirement bond and directly transferring the redeemed amount into an individual retirement plan1 7viii7 other factors affecting retirement savings decisions1 and 7ix7 such other information as the ,secretary determines necessary or appropriate4 7#h7 ,treatment as ,roth ,,ira ,a qualifying employee for whom an automatic ,,ira is established under paragraph 7#a7 may elect1 at such time and in such manner and form as the ,secretary may prescribe but not later than the due date of the return for the taxable year in which such automatic ,,ira is established1 whether to treat the individual retirement plan as described1 or not described1 in section #djh;,a4 ,if no such election is made1 the plan shall be treated as described in section #djh;,a and shall meet the requirements of section #djh;,a 7including any appropriate adjustment or conversion as may be provided by the ,secretary74 7e7 ,treatment of contributions 7#a7 ,in general ,a contribution to an individual retirement plan or purchase of a retirement bond on behalf of an employee under a qualifying automatic ,,ira arrangement shall be treated for purposes of this title as if it had been made directly by the employee1 including for purposes of limitations on contributions to individual retirement plans4 7#b7 ,coordination with withholding ,the ,secretary shall modify the withholding exemption certificate under section #cdjb7;f7 so that1 in the case of any qualifying employee covered under an automatic ,,ira arrangement1 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 procedures4 7#c7 ,individual retirement plan rules applicable ,the provisions of this title applicable to an individual retirement plan 7as defined in section #ggja7;a77#cg771 including provisions relating to contributions1 holding and distributions1 shall apply to a qualifying retirement bond1 except as determined by the ,secretary4 7#d7 ,rollover from bonds to ,,ira ,the ,secretary shall provide for procedures by which an individual may periodically elect to transfer qualifying retirement bonds 7with their proceeds7 held by the individual to an individual retirement account4 ,any such transfer shall be treated as a rollover contribution for purposes of section #djh7;d77#c7 7other than subparagraph 7,b7 thereof74 7f7 ,model notice ,the ,secretary1 in coordination with the ,director of the ,consumer ,financial ,protection ,bureau1 shall-- 7#a7 provide a model notice1 written in a manner calculated to be understandable to the average worker1 that is simple for employers to use-- 7,a7 to notify employees of the requirement under section #dihj;,j for the employer to provide certain employees with the opportunity to participate in a qualifying automatic ,,ira arrangement1 and 7,b7 to satisfy the requirements of subsection 7d77#c77;,c71 7#b7 provide uniform forms for enrollment1 including automatic enrollment1 in an automatic ,,ira arrangement1 and 7#c7 establish a website or other electronic means that small employers can access and use to obtain information on automatic ,,ira arrangements and to obtain required notices and forms4 ,the information referred to in paragraph 7#c7 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 plans and associated investment options that are appropriate for use in automatic ,,ira arrangements4 7g7 ,qualifying ,state-,facilitated automatic ,,ira ,for purposes of this section-- 7#a7 ,in general ,the term qualifying ,state-facilitated automatic ,,ira means an arrangement of an employer 7determined without regard to whether the employer is required to maintain the arrangement7 which operates as part of a program maintained or facilitated by any ,state1 if-- 7,a7 such program is established and maintained as a ,state-sponsored or ,state-facilitated payroll deduction savings program using automatic enrollment and is expressly established pursuant to ,state law providing specifically for such program1 7,b7 such program is implemented and administered by the ,state establishing the program1 which is responsible for investing the employee savings or for selecting investment alternatives for employees to choose1 7,c7 such program treats employees as having automatically elected payroll deductions in an amount or percentage of compensation1 including any automatic increases in such amount or percentage1 unless the employee specifically elects not to have such deductions made 7or specifically elects to have the deductions made in a different amount or percentage of compensation allowed by the program71 and provides that employees are given adequate advance notice of their right to make such elections1 7,d7 contributions under such program are invested in individual retirement plans or qualifying retirement bonds1 7,e7 such program generally requires participation by certain employers in the ,state which do not offer their employees certain types of tax-favored retirement plans or arrangements specified in the terms of the program1 7,f7 under such program1 employers do not make employer contributions1 but are required to participate in activities including collection of employee contributions through payroll deduction and remittance of contributions to the program1 maintenance of records regarding such collections and remittances1 provision of notice to employees1 and provision of information to the ,state necessary to facilitate the operation and administration of the program1 7,g7 employers participating in the program receive no direct or indirect consideration for participation in the form of cash or otherwise1 other than consideration 7including tax credits or other tax or financial incentives7 received directly from the ,state or from the ,federal government1 7,h7 under such program1 the ,state assumes responsibility for the security of payroll deductions and employee savings1 and 7,i7 under such program1 the ,state adopts measures to ensure that employees are notified of their rights under the program and creates a mechanism for enforcement of those rights4 ,for purposes of subparagraph 7,b71 the ,state administering a program may delegate to and utilize one or more service or investment providers1 or other private- or public-sector entities1 to operate and administer the program1 if the ,state retains full responsibility for the operation and administration of the program4 7#b7 ,participation available to non-employees ,a program of a ,state described in paragraph 7#a7 may permit participation by individuals who are not employees1 including self-employed individuals1 independent contractors1 sole proprietors1 and partners4 7#c7 ,program may be maintained by multiple ,states ,the program described in paragraph 7#a7 may be part of a multi-,state program1 plan1 compact1 alliance1 partnership1 or other multi-,state or regional arrangement4 7#d7 ,state ,for purposes of this section1 the term ,state has the meaning given such term in section #c7aj7 of the ,employee ,retirement ,income ,security ,act of #aigd1 except that such term also includes any governmental agency or instrumentality of a ,state4 7h7 ,cross reference ,for provision preempting conflicting ,state laws1 see section #b7;j7 of the ,automatic ,,ira ,act of #bjai4 4 7b7 ,mandatory transfers ,section #dja7;a77#ca77;,b77i7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by inserting 7including a plan established through a qualifying automatic ,,ira arrangement 7as defined in section #djh;,b77 after individual retirement plan each place it appears1 and 7#b7 by adding at the end the following new sentence3 ,any amount so transferred 7and any earnings thereon7 shall be invested only in investments described in section #djh;,b7d77#f744 7c7 ,penalty for failure ,to timely remit contributions to automatic ,,ira arrangements ,section #dige7;c7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#g7 ,special rule for qualifying automatic ,,ira arrangements ,for purposes of paragraph 7#a71 if an employer is required under a qualifying automatic ,,ira arrangement under section #djh;,b to deposit amounts withheld from an employee's compensation into an individual retirement account or toward the purchase of a qualifying retirement bond 7as defined in section #djh;,b7d77#g77 but fails to do so within the time prescribed under section #djh;,b7d77#c77;,a71 such amounts shall be treated as assets of the individual retirement account4 4 7d7 ,coordination with ,employee ,retirement ,income ,security ,act of #aigd 7#a7 ,exemption 7,a7 ,in general ,section #c7b7 of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #ajjb7b77 is amended-- 7i7 by inserting or 7,c7 after subparagraph 7,b7 in subparagraph 7,a71 and 7ii7 by adding at the end the following new subparagraph3 7,c7 ,a qualifying automatic ,,ira arrangement described in section #djh;,b of the ,internal ,revenue ,code of #aihf shall not be treated as an employee pension benefit plan or pension plan if1 under the arrangement1 contributions are to be made to an individual retirement account the provider of which is included in the website list established under section #djh;,b7f77#c7 of such ,code1 are to be made to an individual retirement plan designated by the employee1 or are to be invested in qualifying retirement bonds 7as defined in section #djh;,b7d77#g774 4 7,b7 ,customer identification program ,notwithstanding the amendment made by subparagraph 7,a71 an individual retirement plan established pursuant to an automatic ,,ira arrangement described in section #djh;,b7d7 of the ,internal ,revenue ,code of #aihf shall1 for purposes of any customer identification program established under section #ecah7l7 of title #ca1 ,united ,states ,code1 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 #aigd4 7#b7 ,fiduciary duties ,section #djd7;c7 of such ,act is amended by adding at the end the following new paragraph3 7#f7 ,in the case of an individual retirement account opened under a qualifying automatic ,,ira arrangement under section #djh;,b of such ,code that is not exempt under section #c7b77;,c71 a participant or beneficiary shall1 for purposes of paragraph 7#a71 be treated as exercising control over the assets in the account on and after the #gth day after notice has been given to an employee that such account has been established on behalf of the employee4 ,no reports1 other than those required under section #aja7;g71 shall be required with respect to an account opened under a qualifying automatic ,,ira arrangement under section #djh;,b of such ,code4 4 7e7 ,notice of availability of investment guidelines 7#a7 ,in general ,section #djh7;i7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new sentence3 ,any report furnished under paragraph 7#b7 to an individual shall include notice of the ,internet website of the ,department of ,labor for sources of information on individual investing and diversification44 7#b7 ,updated information ,such information shall be modified 7or updated7 by the ,secretary of ,labor in consultation with the ,secretary of the ,treasury and the ,chairman of the ,securities and ,exchange ,commission to address needed changes due to the creation of automatic ,i,r,as4 7f7 ,failure ,to provide qualifying automatic ,,ira arrangements ,chapter #dc of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #dihj;,j4 ,requirements for covered employers to provide qualifying automatic ,,ira arrangements 7a7 ,general rule ,there is hereby imposed a tax on any failure by a covered employer 7as defined in section #djh;,b7 to maintain a qualifying ,,ira arrangement 7as defined in such section71 and to meet the requirements under such arrangement1 for a calendar year4 7b7 ,amount 7#a7 ,in general ,the amount of the tax imposed by subsection 7a7 on any failure for any calendar year shall be #ajj with respect to each qualifying employee 7as defined in section #djh;,b7c77 to whom such failure relates4 7#b7 ,tax not to apply where failure not discovered and reasonable diligence exercised ,no tax shall be imposed by subsection 7a7 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 maintain a qualifying ,,ira arrangement and to meet the requirements under such arrangement4 7#c7 ,tax not to apply to failures corrected within #ij days ,no tax shall be imposed by subsection 7a7 on any failure if-- 7,a7 the employer subject to liability for the tax under subsection 7a7 exercised reasonable diligence to maintain a qualifying ,,ira arrangement and to meet the requirements under such arrangement1 and 7,b7 the employer provides a qualifying automatic ,,ira arrangement described in section #djh;,b to each qualifying employee 7as defined in section #djh;,b7 by the end of the #ij-;day period beginning on the first date the employer knew1 or exercising reasonable diligence would have known1 that such failure existed4 7#d7 ,waiver by ,secretary ,in the case of a failure which is due to reasonable cause and not to willful neglect1 the ,secretary may waive part or all of the tax imposed by subsection 7a7 to the extent that the payment of such tax would be excessive or otherwise inequitable relative to the failure involved4 7c7 ,procedures for notice ,the ,secretary may prescribe and implement procedures for obtaining confirmation of whether employers are subject to the tax imposed by subsection 7a74 ,the ,secretary1 in the ,secretary's discretion1 may prescribe that the confirmation shall be obtained on an annual or less frequent basis1 and may use for this purpose the annual report or quarterly report for employment taxes1 or such other means as the ,secretary may deem advisable4 4 7g7 ,waiver of early withdrawal penalty for certain distributions following initial election ,to participate in automatic ,,ira arrangement ,section #gb7t7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#aa7 ,distribution following initial election to participate in automatic ,,ira arrangement ,paragraph 7#a7 shall not apply in the case of a distribution to a qualifying employee made not later than #ij days after the initial election under section #djh;,b7d77#a77;,a77ii74 4 7h7 ,bankruptcy ,section #ebb of title #aa1 ,united ,states ,code1 is amended-- 7#a7 in subsection 7d77#ab71 by inserting 1 #djh;,b after #djh;,a1 and 7#b7 in subsection 7n71 by inserting 1 or in a qualifying automatic ,,ira arrangement described in section #djh;,b after section #djh7p7 of such ,code4 7i7 ,conforming amendments 7#a7 ,the table of sections for subpart ,a of part ,i of subchapter ,d of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to section #djh;,a the following new item3 ,sec4 #djh;,b4 ,qualifying automatic ,,ira arrangements4 4 7#b7 ,the table of sections for chapter #dc of such ,act is amended by adding at the end the following new item3 ,sec4 #dihj;,j4 ,requirements for covered employers to provide qualifying automatic ,,ira arrangements4 4 7j7 ,preemption of conflicting ,state laws ,the amendments made by this section shall supersede any law of a ,state that would directly or indirectly prohibit or restrict the establishment or operation of a qualifying automatic ,,ira arrangement meeting the requirements of section #djh;,b of the ,internal ,revenue ,code of #aihf4 ,nothing in such amendments shall be construed to impair or supersede any ,state law to the extent it provides a remedy for the failure to make payroll deposit payments under any such automatic ,,ira arrangement within the period required under such section #djh;,b4 7k7 ,effective date ,the amendments made by this section shall apply to calendar years beginning after ,december #ca1 #bjbj4 7l7 ,regulations ,not later than #ab months after the date of the enactment of this ,act1 the ,secretary of the ,treasury1 in coordination with the ,secretary of ,labor1 shall issue guidance defining the class of guaranteed lifetime income or equivalent arrangements which meet the requirements of section #djh;,b7d77#e77;,e7 of the ,internal ,revenue ,code of #aihf1 as added by this section4 #c4 ,credit for small employers maintaining qualifying automatic ,,ira arrangements 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #de,t4 ,small employer automatic ,,ira arrangement 7a7 ,general rule ,for purposes of section #ch1 in the case of an eligible employer maintaining a qualifying automatic ,,ira arrangement meeting the requirements of section #djh;,b 7without regard to whether the employer is a covered employer71 the small employer automatic ,,ira arrangement credit determined under this section for any taxable year in the credit period is the amount determined under subsection 7b74 7b7 ,amount of credit 7#a7 ,in general ,the amount of the credit determined under this section for any taxable year with respect to an eligible employer shall be the sum of-- 7,a7 #be multiplied by the number of qualifying employees 7within the meaning of section #djh;,b7c77 for whom contributions are made under the qualifying automatic ,,ira arrangement referred to in subsection 7a7 for the calendar year in which the taxable year begins1 plus 7,b7 the amount determined under paragraph 7#b7 with respect to the taxable year4 7#b7 ,amount determined ,the amount determined under this paragraph is-- 7,a7 #ejj in the case of the taxable year which begins in the first calendar year in which the eligible employer maintains the qualifying automatic ,,ira arrangement1 7,b7 #bej in the case of the taxable year which begins in the second calendar year in which the eligible employer maintains such arrangement1 and 7,c7 #j thereafter4 7#c7 ,limitation ,the amount determined under paragraph 7#a77;,a7 for any taxable year shall not exceed #bej4 7#d7 ,coordination with small employer startup credit 7,a7 ,in general ,no credit shall be allowed under this section to the employer for any taxable year if a credit is determined under section #de;,e with respect to the employer for the taxable year4 7,b7 ,extension of credit ,if the eligible employer maintains a qualifying automatic ,,ira arrangement meeting the requirements of section #djh;,b 7without regard to whether the employer is a covered employer7 with respect to any of the first #c calendar years for which the employer could adopt such an arrangement1 and subsequently adopts an eligible employer plan for its employees for any of those years which it maintains throughout such #c-;calendar-year period1 then section #de;,e7b77#a7 shall be applied with respect to the eligible employer by substituting #c taxable years for #b taxable years4 7c7 ,definitions ,for purposes of this section-- 7#a7 ,eligible employer ,the term eligible employer means1 with respect to the calendar year in which the taxable year begins1 an employer which-- 7,a7 maintains a qualifying automatic ,,ira arrangement meeting the requirements of section #djh;,b 7without regard to whether the employer is a covered employer71 7,b7 on each day during the preceding calendar year1 had no more than #ajj employees1 and 7,c7 did not maintain a qualifying plan or arrangement 7described in section #djh;,b7b77 during the portion of the calendar year preceding the adoption of the qualifying automatic ,,ira arrangement and the #b preceding calendar years4 7#b7 ,credit period ,the term credit period means the first #f calendar years in which the eligible employer maintains the qualifying automatic ,,ira arrangement4 7d7 ,other rules ,for purposes of this section1 the rules of section #de;,e7e7 shall apply4 4 7b7 ,credit allowed as part of general business credit ,section #ch7;b7 of the ,internal ,revenue ,code of #aihf is amended by striking plus at the end of paragraph 7#ca71 by striking the period at the end of paragraph 7#cb7 and inserting 1 plus1 and by adding at the end the following new paragraph3 7#cc7 the small employer automatic ,,ira arrangement credit determined under section #de,t7a74 4 7c7 ,clerical amendment ,the table of sections for subpart ,d of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new item3 ,sec4 #de,t4 ,small employer automatic ,,ira arrangement4 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjbj4 #d4 ,increase in credit limitation for small employer pension plan startup costs 7a7 ,in general ,section #de;,e7b77#a7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7#a7 for the first credit year and each of the #b taxable years immediately following the first credit year1 the greater of-- 7,a7 #ejj1 or 7,b7 the lesser of-- 7i7 #bej for each employee of the eligible employer who is not a highly compensated employee 7as defined in section #dae7q77 and who is eligible to participate in the eligible employer plan maintained by the eligible employer1 or 7ii7 #e1jjj1 and 4 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjai4