H.R. 6722

[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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