[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2167 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 2167
To amend the Internal Revenue Code of 1986 to allow employees not
covered by qualified retirement plans to save for retirement through
automatic payroll deposit IRAs, to facilitate similar saving by the
self-employed, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 3, 2007
Mr. Neal of Massachusetts (for himself, Mr. English of Pennsylvania,
Mr. Emanuel, Mr. Larson of Connecticut, and Ms. Schwartz) introduced
the following bill; which was referred to the Committee on Ways and
Means, and in addition to the Committee on Education and Labor, for a
period to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow employees not
covered by qualified retirement plans to save for retirement through
automatic payroll deposit IRAs, to facilitate similar saving by the
self-employed, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Automatic IRA Act of 2007''.
SEC. 2. EMPLOYEES NOT COVERED BY QUALIFIED RETIREMENT PLANS OR
ARRANGEMENTS ENTITLED TO PARTICIPATE IN PAYROLL DEPOSIT
IRA ARRANGEMENTS.
(a) In General.--Subpart A of part I of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section
408A the following new section:
``SEC. 408B. RIGHT TO PAYROLL DEPOSIT IRA ARRANGEMENTS AT WORK.
``(a) Requirement to Provide Payroll Deposit IRA Arrangement.--Each
employer (other than an employer described in subsection (e)) shall
provide to each applicable employee of the employer for any calendar
year the opportunity to participate in a payroll deposit IRA
arrangement which meets the requirements of this section.
``(b) Payroll Deposit IRA Arrangement.--For purposes of this
section--
``(1) In general.--The term `payroll deposit IRA
arrangement' means a written arrangement of an employer--
``(A) under which an applicable employee eligible
to participate in the arrangement may elect to
contribute to an individual retirement plan established
by or on behalf of the employee by having the employer
make periodic direct deposit or other payroll deposit
payments (including electronic payments) to the plan by
payroll deduction, and
``(B) which meets the requirements of paragraph
(2).
``(2) Administrative requirements.--The requirements of
this paragraph are met with respect to any payroll deposit IRA
arrangement if--
``(A) the employer must make the payments elected
under paragraph (1)(A) on or before the later of--
``(i) the due date for the deposit of tax
required to be deducted and withheld under
chapter 24 (relating to collection of income
tax at source on wages) for the payroll period
to which such payments relate, or
``(ii) the 30th day following the last day
of the month with respect to which the payments
are to be made,
``(B) subject to a requirement for reasonable
notice, an employee may elect to terminate
participation in the arrangement at any time during a
calendar year, except that if an employee so
terminates, the arrangement may provide that the
employee may not elect to resume participation until
the beginning of the next calendar year,
``(C) each employee eligible to participate may
elect, during the 60-day period or other period
specified by the Secretary before the beginning of any
calendar year (and during the 60-day period or other
period specified by the Secretary before the first day
the employee is eligible to participate), to
participate in the arrangement, or to modify the
employee's election under the arrangement (including
the amounts subject to the arrangement and the manner
in which such amounts are invested), for such year,
``(D) the employer provides--
``(i) immediately before the beginning of
each period described in subparagraph (C), a
notice to each employee of the employee's
opportunity to make the election and the
maximum amount which may be contributed to an
individual retirement plan on an annual basis,
and
``(ii) if the arrangement includes an
automatic enrollment arrangement, the notices
required under subsection (h) with respect to
the automatic enrollment arrangement,
``(E) subject to subsection (f), the arrangement
provides that an employee may elect to have
contributions made to any individual retirement plan
specified by the employee, and
``(F) if the arrangement does not include an
automatic enrollment arrangement--
``(i) the arrangement requires the employer
to take all reasonable actions to solicit from
all employees eligible to participate in the
arrangement an explicit election to either
participate or not to participate in the
arrangement, and
``(ii) the arrangement provides that if an
employee fails to make an explicit election
under clause (i) within the time prescribed
under the arrangement, the employee will be
treated as having made an election to
participate in the arrangement (and amounts
shall be invested on behalf of the participant)
in the same manner as if the arrangement had
included an automatic enrollment arrangement
under subsection (g).
``(c) Applicable Employee Defined; Related Definitions and Rules.--
For purposes of this section--
``(1) Applicable employee.--
``(A) In general.--The term `applicable employee'
means, with respect to any calendar year, any
employee--
``(i) who was not eligible under a
qualified plan or arrangement maintained by the
employer for service for the preceding calendar
year, and
``(ii) with respect to whom it is
reasonable to expect that the employee will not
be eligible during the calendar year under such
a qualified plan or arrangement.
``(B) Special rules.--For purposes of subparagraph
(A)(i)--
``(i) Eligibility.--An employee shall be
treated as eligible under a plan for a
preceding calendar year if, as of the last day
of the last plan year ending in the preceding
calendar year, the employee has satisfied the
plan's eligibility requirements.
``(ii) Excluded plans.--A qualified plan or
arrangement shall not be taken into account
under this paragraph if--
``(I) the plan or arrangement is
frozen as of the first day of the
preceding calendar year, or
``(II) in the case of a plan or
arrangement under which the only
contributions are discretionary on the
part of the sponsor, there has not been
an employer contribution made to the
plan or arrangement for the 2-plan-year
period ending with the last plan year
ending in the second preceding calendar
year and it is not reasonable to assume
that an employer contribution will be
made for the plan year ending in the
preceding calendar year.
``(2) Excludable employees.--An employer may elect to
exclude from treatment as applicable employees under paragraph
(1)--
``(A) employees described in section 410(b)(3),
``(B) employees who have not attained the age of 18
before the beginning of the calendar year,
``(C) employees who have not completed at least 3
months of service with the employer,
``(D) in the case of an employer that maintains a
qualified plan or arrangement which generally excludes
employees who have not satisfied the eligibility
requirements described in section 410(a)(1)(A) (without
regard to section 410(a)(1)(B)), employees who have not
yet satisfied such requirements,
``(E) employees who are eligible to make salary
reduction contributions under an arrangement which
meets the requirements of section 403(b), and
``(F) all employees of the employer if the employer
maintains an arrangement described in section 408(p).
``(3) Qualified plan or arrangement.--The term `qualified
plan or arrangement' means a plan, contract, pension, or trust
described in section 219(g)(5).
``(4) Exception for employees of governments and
churches.--The term `applicable employee' shall not include an
employee of--
``(A) a government or entity described in section
414(d), or
``(B) a church or a convention or association of
churches which is exempt from tax under section 501,
including any employee described in section
414(e)(3)(B).
``(5) Designation of applicable employees.--The Secretary
shall issue guidelines for determining the class or classes of
employees to be covered by a payroll deposit IRA arrangement.
Such guidelines shall provide that if an employer elects under
paragraph (2) to exclude employees from the arrangement, the
employer shall specify the classification or categories of
employees who are not so covered.
``(d) Payroll Deposit IRA Contributions Treated Like Other
Contributions to Individual Retirement Plans.--
``(1) Tax treatment unaffected.--The fact that a
contribution to an individual retirement plan is made on behalf
of an employee under a payroll deposit IRA arrangement instead
of being made directly by the employee shall not affect the
deductibility or other tax treatment of the contribution or of
other amounts under this title.
``(2) Payroll savings contributions taken into account.--
Any contribution made on behalf of an employee under a payroll
deposit IRA arrangement shall be taken into account in applying
the limitations on contributions to individual retirement plans
and the other provisions of this title applicable to individual
retirement plans as if the contribution had been made directly
by the employee.
``(e) Exception for Certain Small and New Employers.--
``(1) In general.--The requirements of this section shall
not apply for any calendar year to an employer if--
``(A) the employer did not have more than 10
employees who received at least $5,000 of compensation
from the employer for the preceding calendar year, or
``(B) was not in existence at all times during the
2 preceding calendar years and did not have more than
100 employees who received at least $5,000 of
compensation from the employer on any day during either
of the 2 preceding calendar years.
``(2) Operating rules.--In determining the number of
employees for purposes of this subsection--
``(A) any rule applicable in determining the number
of employees for purposes of section 408(p)(2)(C) shall
be applicable under this subsection,
``(B) all members of the same family (within the
meaning of section 318(a)(1)) shall be treated as 1
individual, and
``(C) any reference to an employer shall include a
reference to any predecessor employer.
``(f) Deposits to Individual Retirement Plans Other Than Those
Selected by Employee.--
``(1) 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 contributions (or all contributions on behalf of employees
who do not specify an individual retirement plan, trustee, or
issuer to receive the contributions) to individual retirement
plans specified in paragraph (2) or (4).
``(2) Plans of a designated trustee or issuer.--An employer
may elect to have contributions for all applicable employees
participating in a payroll deposit IRA arrangement made to
individual retirement plans of a designated trustee or issuer
under the arrangement. The preceding sentence shall not apply
unless each participant is notified in writing that the
participant's balance may be transferred without cost or
penalty to another individual retirement plan established by or
on behalf of the participant.
``(3) Payroll tax deposit procedure.--The Secretary, in
consultation with the TSP II Board, shall establish a procedure
under which an employer--
``(A) may include with each deposit of tax required
to be deducted and withheld under chapter 24 the
aggregate amounts, for the period covered by the
deposit, which applicable employees have designated
under subsection (b)(1)(A) (or are deemed to have
designated under subsection (b)(2)(F)(ii) or under an
automatic enrollment arrangement described in
subsection (g)) for contribution to individual
retirement plans, established on behalf of the
employees under paragraph (4), and
``(B) specifies, in such manner as the Secretary
may prescribe, the following information for each
applicable employee for whom a contribution is to be
made:
``(i) The employee's name and TIN.
``(ii) The amount of the contribution.
``(iii) The investment options selected by
the employee (or deemed to have been selected
by the employee under such automatic enrollment
arrangement) and the amount of the contribution
allocated to each option.
``(4) Establishment and maintenance of accounts under
payroll tax deposit procedure.--
``(A) In general.--Subject to the provisions of
this section and section 408C, the TSP II Board shall
provide for the establishment and maintenance of
individual retirement plans (including automatic IRAs)
into which contributions may be deposited under
paragraph (3). To the maximum extent practicable, the
TSP II Board shall--
``(i) enter into contracts with persons
eligible to be trustees of individual
retirement plans under section 408 to establish
such plans, to provide the investment funds and
investment management, and to provide notice,
record keeping, and other administrative
services, and
``(ii) ensure that the costs of investment
management and administration are kept to a
minimum, including through consideration of the
use of investments which involve passive
management and which seek to replicate the
performance of a portion of the market.
``(B) Payroll deposit features.--The TSP II Board
shall establish procedures so that contributions may be
made to individual retirement plans (including
automatic IRAs) under paragraph (3) without undue
administrative or paperwork requirements on
participating employers. Such procedures shall ensure
that only 1 such plan may be established for each TIN.
``(C) Limitation on rollovers.--If--
``(i) any amount is paid or distributed out
of an individual retirement plan established
under this paragraph, and
``(ii) such amount is paid into an
individual retirement plan which was not
established under this paragraph,
the payment described in clause (ii) shall be treated
as a rollover contribution for purposes of section
408(d)(3) if and only if the balance to the credit of
the individual in such individual retirement plan or
arrangement immediately before the payment described in
clause (i) was at least $15,000.
``(g) Coordination With Automatic Enrollment and Other Default
Election Provisions.--
``(1) In general.--Contributions under a payroll deposit
IRA arrangement may be made pursuant to an automatic enrollment
arrangement.
``(2) Automatic enrollment arrangement.--The term
`automatic enrollment arrangement' means an arrangement under a
payroll deposit IRA arrangement and subject to rules prescribed
by the Secretary--
``(A) under which an individual may elect to have
the employer make payments as contributions to an
individual account plan on behalf of the individual, or
to the individual directly in cash,
``(B) under which the individual is treated as
having elected to have the employer make such
contributions in an amount equal to a specified
percentage of compensation or dollar amount until the
individual specifically elects not to have such
contributions made (or specifically elects to have such
contributions made at a different percentage or in a
different amount), and
``(C) which meets notice requirements substantially
similar to those described in section 414(w)(4).
``(3) Default investments.--If an employee is deemed under
an automatic enrollment arrangement to have made an election to
participate in a payroll deposit IRA arrangement--
``(A) the employee shall be deemed to have made an
election to make contributions in the amount specified
in paragraph (4),
``(B) such contributions shall be transferred to--
``(i) an automatic IRA, or
``(ii) if the employer has made an election
under subsection (f)(2), to an individual
retirement plan of the designated trustee or
issuer but only if the requirements of
subparagraph (C) are met with respect to such
individual retirement plan, and
``(C) such contributions shall be invested as
provided in paragraph (5).
``(4) Amount of contributions.--
``(A) In general.--The amount specified in this
paragraph is 3 percent of compensation.
``(B) Authority of board to provide for annual
increases.--The TSP II Board may by regulation provide
for annual increases in the percentage of compensation
an employee is deemed to have elected under paragraph
(2) but in no event shall the percentage of
compensation an employee is deemed to have elected
exceed 8 percent.
``(C) Contribution limit.--The contributions under
paragraph (2) on behalf of an employee for any calendar
year shall not exceed the dollar limits applicable to
the employee for the calendar year under section 219 or
408A.
``(5) Investment in life cycle fund or other investments
specified by the board.--Amounts contributed under paragraph
(3) shall be invested in--
``(A) a life cycle fund similar to the life cycle
funds offered under the Thrift Savings Fund established
under subchapter III of chapter 84 of title 5, United
States Code, or
``(B) such other investment or investments as the
TSP II Board specifies in regulations (which shall be
promulgated after taking into account, but not
necessarily conforming to, regulations prescribed by
the Secretary of Labor under section 404(c)(5) of the
Employee Retirement Income Security Act of 1974) and
which entails asset allocation and extensive
diversification.
``(6) Coordination with withholding.--The Secretary shall
modify the withholding exemption certificate under section
3402(f) so that any notice and election requirements with
respect to an automatic enrollment arrangement which is part of
a payroll deposit IRA arrangement may be met through the use of
such certificate.
``(h) Model Notice.--The Secretary, in consultation with the TSP II
Board, shall--
``(1) provide a model notice, written in a manner
calculated to be understandable to the average worker, that is
simple for employers to use--
``(A) to notify employees of the requirement under
this section for the employer to provide certain
employees with the opportunity to participate in a
payroll deposit IRA arrangement, and
``(B) to satisfy the requirements of subsection
(b)(2)(D),
``(2) provide uniform forms for enrollment, including
automatic enrollment, in a payroll deposit IRA arrangement, and
``(3) establish a web site or other electronic means for
small employers to access and use to obtain information on
payroll deposit IRA arrangements and to obtain required notices
and forms.
``(i) Cross Reference.--For provision preempting conflicting State
laws, see section 2(g) of the Automatic IRA Act of 2007.''.
(b) Notice of Availability of Investment Guidelines.--Section
408(i) of the Internal Revenue Code of 1986 (relating to reports) is
amended by adding at the end the following new sentence: ``Any report
furnished under paragraph (2) to an individual shall include notice of
the availability of, and methods of acquiring, the basic investment
guidelines prepared by the Secretary of Labor.''.
(c) Development of Basic Investment Guidelines.--
(1) In general.--The Secretary of Labor shall, in
consultation with the Secretary of Treasury, develop and
publish basic guidelines for investing for retirement. Except
as otherwise provided by the Secretary of Labor, such
guidelines shall include--
(A) information on the benefits of diversification,
(B) information on the essential differences, in
terms of risk and return, between various pension plan
investments, including stocks, bonds, mutual funds, and
money market investments,
(C) information on how an individual's pension plan
investment allocations may differ depending on the
individual's age and years to retirement and on other
factors determined by the Secretary of Labor,
(D) sources of information where individuals may
learn more about pension rights, individual investing,
and investment advice, and
(E) such other information related to individual
investing as the Secretary of Labor determines
appropriate.
(2) Calculation information.--The guidelines under
paragraph (1) shall include addresses for Internet sites and
worksheets which a participant or beneficiary in a pension plan
may use to calculate--
(A) the retirement age value of the participant's
or beneficiary's nonforfeitable pension benefits under
the plan (expressed as an annuity amount and determined
by reference to varied historical annual rates of
return and annuity interest rates), and
(B) other important amounts relating to retirement
savings, including the amount which a participant or
beneficiary would be required to save annually to
provide a retirement income equal to various
percentages of their current salary (adjusted for
expected growth prior to retirement).
(3) Public comment.--The Secretary of Labor shall provide
at least 90 days for public comment on proposed guidelines
before publishing the final guidelines.
(4) Rules relating to guidelines.--The guidelines under
paragraph (1)--
(A) shall be written in a manner calculated to be
understood by the average plan participant, and
(B) may be delivered in written, electronic, or
other appropriate manner to the extent such manner
would ensure that the guidelines are reasonably
accessible to participants and beneficiaries.
(d) Penalty for Failure to Provide Access to Payroll Savings
Arrangements.--Chapter 43 of the Internal Revenue Code of 1986
(relating to qualified pension, etc., plans) is amended by adding at
the end the following new section:
``SEC. 4980H. REQUIREMENTS FOR EMPLOYERS TO PROVIDE EMPLOYEES ACCESS TO
PAYROLL DEPOSIT IRA ARRANGEMENTS.
``(a) General Rule.--There is hereby imposed a tax on any failure
by an employer to meet the requirements of subsection (d) for a
calendar year.
``(b) Amount.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure for any calendar year shall be
$100 with respect to each employee to whom such failure
relates.
``(2) Tax not to apply where failure not discovered and
reasonable diligence exercised.--No tax shall be imposed by
subsection (a) on any failure during any period for which it is
established to the satisfaction of the Secretary that the
employer subject to liability for the tax did not know that the
failure existed and exercised reasonable diligence to meet the
requirements of subsection (d). In no event shall the tax be
imposed with respect to any failure that ends before the
expiration of 90 days after the employer has responded or has
had a reasonable opportunity to respond to a request for
confirmation of compliance under subsection (c).
``(3) Tax not to apply to failures corrected within 30
days.--No tax shall be imposed by subsection (a) on any failure
if--
``(A) the employer subject to liability for the tax
under subsection (a) exercised reasonable diligence to
meet the requirements of subsection (d), and
``(B) the employer provides the payroll deposit IRA
arrangement described in section 408B to each employee
eligible to participate in the arrangement by the end
of the 30-day period beginning on the first date the
employer knew, or exercising reasonable diligence would
have known, that such failure existed.
``(4) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax would
be excessive or otherwise inequitable relative to the failure
involved.
``(c) Procedures for Notice.--Not later than 6 months after the
date of the enactment of this section, the Secretary shall prescribe
and implement procedures for obtaining from employers confirmation that
such employers are in compliance with the requirements of subsection
(d). The Secretary, in the Secretary's discretion, may prescribe that
the confirmation shall be obtained on an annual or less frequent basis,
and may use for this purpose the annual report or quarterly report for
employment taxes, or such other means as the Secretary may deem
advisable.
``(d) Requirement to Provide Employee Access to Payroll Deposit IRA
Arrangements.--The requirements of this subsection are met if the
employer meets the requirements of section 408B.''.
(e) Coordination With ERISA Fiduciary Duties.--Section 404(c)(2) of
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)(2))
is amended--
(1) by inserting ``or an individual retirement plan
designated by the employer under section 408B of such Code''
after ``1986'',
(2) by inserting ``(7 days after notice has been given to
an employee that an individual retirement plan has been
established on behalf of the employee under section 408B of
such Code)'' after ``established'' in subparagraph (C), and
(3) by inserting ``or with respect to an individual
retirement plan designated by an employer under section 408B of
such Code'' after ``arrangement'' in the last sentence.
(f) Conforming Amendments.--
(1) The table of sections for subpart A of part I of
subchapter A of chapter 1 of the Internal Revenue Code of 1986
is amended by inserting after the item relating to section 408A
the following new item:
``Sec. 408B. Right to payroll deposit IRA arrangements at work.''.
(2) The table of sections for chapter 43 of such Code is
amended by adding at the end the following new item:
``Sec. 4980H. Requirements for employers to provide employees access to
payroll deposit IRA arrangements.''.
(g) 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
payroll deposit IRA arrangement meeting the requirements of section
408B of the Internal Revenue Code of 1986 (including the inclusion in
any such arrangement of an automatic enrollment arrangement as defined
in section 408B(g) of such Code).
(h) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 31, 2008.
SEC. 3. CREDIT FOR SMALL EMPLOYERS MAINTAINING PAYROLL DEPOSIT IRA
ARRANGEMENTS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by adding at the end the following new section:
``SEC. 45O. SMALL EMPLOYER PAYROLL DEPOSIT IRA ARRANGEMENT COSTS.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible employer maintaining a payroll deposit IRA arrangement meeting
the requirements of section 408B (without regard to whether or not the
employer is required to maintain the arrangement), the small employer
payroll deposit IRA arrangement cost credit determined under this
section for any taxable year is the amount determined under subsection
(b).
``(b) Amount of Credit.--
``(1) In general.--The amount of the credit determined
under this section for any taxable year with respect to an
eligible employer shall be equal to the lesser of--
``(A) $25 multiplied by the number of applicable
employees (within the meaning of section 408B(c)) for
whom contributions are made under the payroll deposit
IRA arrangement referred to in subsection (a) for the
calendar year in which the taxable year begins, or
``(B) $250.
``(2) Duration of credit.--No credit shall be determined
under this section for any taxable year other than a taxable
year which begins in the first 2 calendar years in which the
eligible employer maintains a payroll deposit IRA arrangement
meeting the requirements of section 408B.
``(3) Coordination with small employer startup credit.--No
credit shall be allowed under this section for any taxable year
if a credit is determined under section 45E for the taxable
year.
``(c) Eligible Employer.--For purposes of this section, the term
`eligible employer' means, with respect to any calendar year in which
the taxable year begins, an employer which maintains a payroll deposit
IRA arrangement meeting the requirements of section 408B and which, on
each day during the preceding calendar year, had no more than 100
employees.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) of the Internal Revenue Code of 1986 (defining current year
business credit) is amended by striking ``plus'' at the end of
paragraph (30), by striking the period at the end of paragraph (31) and
inserting ``, plus'', and by adding at the end the following new
paragraph:
``(32) in the case of an eligible employer (as defined in
section 45O(c)) maintaining a payroll deposit IRA arrangement
meeting the requirements of section 408B, the small employer
payroll deposit IRA arrangement cost credit determined under
section 45O(a).''
(c) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end the following new item:
``Sec. 45O. Small employer payroll deposit IRA arrangement costs.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2008.
SEC. 4. ESTABLISHMENT OF AUTOMATIC IRAS.
(a) In General.--Subpart A of part I of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.), as amended by section 2, is amended
by inserting after section 408B the following new section:
``SEC. 408C. AUTOMATIC IRAS.
``(a) General Rule.--An automatic IRA shall be treated for purposes
of this title in the same manner as an individual retirement plan. An
automatic IRA may also be treated as a Roth IRA for purposes of this
title if it meets the requirements of section 408A.
``(b) Automatic IRA.--For purposes of this section, the term
`automatic IRA' means an individual retirement plan (as defined in
section 7701(a)(37)) which meets the investment and fee requirements
under the regulations under subsection (c).
``(c) Investment and Fee Requirements.--
``(1) In general.--The TSP II Board, in consultation with
the Secretary and the Secretary of Labor, shall, not later than
1 year after the date of the enactment of this section,
prescribe regulations which set forth the requirements of this
subsection which an individual retirement plan must meet in
order to be treated as an automatic IRA.
``(2) Investment options.--The regulations under paragraph
(1) shall provide that an automatic IRA shall allow the
individual on whose behalf the individual retirement plan is
established to invest contributions to, and earnings of, the
plan in all of the following investment options:
``(A) Options which are similar to all investment
options which are available (at the time the plan is
established) to a participant in the Thrift Savings
Fund established under subchapter III of chapter 84 of
title 5, United States Code.
``(B) Any other investment option specified in the
regulations.
Such regulations shall specify which of the investment options
shall be treated as default investment options for purposes of
section 408B(g)(5).
``(3) Investment fees.--
``(A) In general.--The regulations under paragraph
(1) shall provide that an automatic IRA shall not
charge any investment fees which, in the aggregate, are
not reasonable (as determined under such regulations).
``(B) Investment fees.--For purposes of this
paragraph, the term `investment fees' includes any fee,
commission, asset management fee, compensation for
services, or any other charge or fee specified in the
regulations under paragraph (1) which is imposed with
respect to the automatic IRA.''.
(b) Studies of Spousal Consent Requirements and Promotion of
Certain Lifetime Income Arrangements.--
(1) In general.--The Secretary of the Treasury and the
Secretary of Labor shall jointly conduct a separate study of
the feasibility and desirability of each of the following:
(A) Extending to automatic IRAs spousal consent
requirements similar to, or based on, those that apply
under the Federal employees' Thrift Savings Plan,
including consideration of whether modifications of
such requirements are necessary to apply them to
automatic IRAs.
(B) Promoting the use of low-cost annuities,
longevity insurance, or other guaranteed lifetime
income arrangements in automatic IRAs, including
consideration of--
(i) appropriate means of arranging for, or
encouraging, individuals to receive at least a
portion of their distributions in some form of
low-cost guaranteed lifetime income, and
(ii) issues presented by possible
additional differences in, or uniformity of,
provisions governing different IRAs.
(2) Report.--Not later than 18 months after the date of the
enactment of this Act, the Secretaries shall report the results
of each study conducted under subsection (a), together with any
recommendations for legislative changes, to the Committees on
Finance and Health, Education, Labor, and Pensions of the
Senate and the Committees on Ways and Means and Education and
Labor of the House of Representatives.
(c) Mandatory Transfers.--Section 401(a)(31)(B) of the Internal
Revenue Code of 1986 is amended--
(1) by inserting ``(including an automatic IRA)'' after
``individual retirement plan'' each place it appears, and
(2) by adding at the end the following new sentence: ``Any
amount so transferred (and any earnings thereon) shall be
invested in a default investment described in section
408B(g)(5).''
(d) Clerical Amendment.--The table of sections for subpart A of
part I of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to section 408B
the following new item:
``Sec. 408C. Automatic IRAs.''.
(e) Effective Date.--The amendments made by this section shall
apply to calendar years beginning on or after the date on which
proposed and temporary or final regulations described in section
408C(c) of the Internal Revenue Code of 1986 (as added by this Act) are
issued.
SEC. 5. ESTABLISHMENT OF TSP II BOARD.
(a) Establishment.--There is established in the executive branch of
the Government a TSP II Board. The board shall be established and
maintained in the same manner as the Federal Retirement Thrift
Investment Board under subchapter VII of chapter 84 of title 5, United
States Code.
(b) Executive Director.--The TSP II Board shall appoint an
Executive Director in a similar manner and with similar functions as
the Executive Director of the Federal Retirement Thrift Investment
Board under section 8474 of title 5, United States Code.
(c) Duties of Board.--The TSP II Board shall establish policies and
procedures for--
(1) establishment and maintenance of individual retirement
plans under section 408B(f)(3) of the Internal Revenue Code of
1986,
(2) the investment and management of contributions to such
individual retirement plans,
(3) the amount of contributions, and the investment of such
contributions, under automatic enrollment arrangements under
section 408B(g) of such Code, including the designation of
investment funds in which such contributions may be invested,
and
(4) the establishment of automatic IRAs under section 408C
of such Code, including the issuance of regulations under
subsection (c) of such section.
(d) Best Practices.--The TSP II Board shall, on a continual basis,
prescribe and encourage best practices (including cost efficiencies and
innovations) in enrollment, investment, distribution, and other
procedures or arrangements relating to retirement savings and
investment. In carrying out its responsibilities under this section,
the TSP II Board may implement (by contract or otherwise) pilot
projects to help assess the efficacy and workability of specific
practices and arrangements.
(e) Expansion of Use of IRAs by Self-Employed and Other
Individuals.--The TSP II Board shall establish procedures to
disseminate information (through use of the Internet and other
appropriate means) to facilitate and encourage--
(1) the use by self-employed and other individuals of
automatic debit and similar arrangements for investment in
individual retirement plans, including automatic IRAs,
(2) efforts by voluntary associations to promote savings in
individual retirement plans, including automatic IRAs, by their
members and others, and
(3) the direct deposit of Federal and State income tax
refunds in individual retirement plans, including automatic
IRAs.
(f) Exclusive Interest.--The members of the TSP II Board shall
discharge their responsibilities solely in the interest of participants
and beneficiaries under individual retirement plans described in
section 408B of the Internal Revenue Code of 1986.
(g) Other Provisions Made Applicable.--The provisions of
subsections (f)(3), (g), (i), and (j) of section 8472 of title 5,
United States Code, shall apply to the TSP II Board.
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