This bill, the Automatic IRA Act of 2025, adds rules to the Internal Revenue Code to define and set standards for automatic contribution retirement plans and employer-facilitated automatic IRAs. It defines an "automatic contribution plan or arrangement" and an "automatic IRA arrangement," sets notice, eligibility, contribution, investment, fee, and lifetime-income requirements, and requires model notices, forms, and a Treasury website and certification process. The bill creates an excise tax for employers that fail to maintain or facilitate required automatic arrangements, adds a small-employer tax credit to encourage new automatic IRA arrangements, directs the Treasury to create an Automatic IRA Advisory Group, amends rules about late or missing payroll deposits and certain early distribution penalties, and preempts state law that would bar or limit automatic IRA arrangements (with a limited qualified-state-law exception).
Employers: Employers would need to offer or facilitate automatic contribution plans or automatic IRA arrangements that meet the bill's notice, eligibility, contribution, investment, fee, and lifetime-income rules. Employers may be able to use a designated provider and must provide timely payroll deposits. Some small employers can claim a credit (see Expenses). Certain small or new employers, government and church plans, and other exceptions apply. The bill also says automatic IRAs can be made available to non-employees by Treasury rule.
Employees and individuals: Workers could be automatically enrolled at a default contribution rate that rises over time (to 10 percent after initial ramping), with the right to opt out or change contributions and investments. Default investments would generally be target-date/lifecycle funds or other qualified default options. Payroll-deduction IRA accounts would default to Roth designation unless the individual elects otherwise. Participants may have an option to receive at least half of a vested balance as lifetime income except where the vested balance is $200,000 or less.
State law and state programs: The bill would supersede state laws that directly or indirectly prohibit or restrict automatic IRA arrangements. Employers that maintain a qualifying arrangement would not be required to participate in a separate state payroll-deduction savings program, except where a State law is a qualifying state law described in the bill.
Small-employer credit: The bill creates a new tax credit (section 45BB) of $500 for each eligible small employer for each taxable year in the credit period (the first 3 calendar years after the arrangement starts), subject to rules in the bill.
Employer excise tax for noncompliance: The bill creates a new excise tax (section 4980J) of $10 for each day of noncompliance per affected employee, with annual inflation adjustments after 2028. The tax has exceptions, limits, and a general cap of $500,000 for unintentional failures in a taxable year, plus other relief and waiver rules in specified cases.
Other monetary provisions: The bill amends penalty and tax-code provisions related to failed or late deposit of employee withholding into automatic IRA accounts and provides a limited waiver of the 10% early-distribution penalty for certain distributions made within 90 days after initial automatic-IRA enrollment.
Budgetary totals: No publicly available information on the bill's total federal cost, budget estimate, or broader fiscal impact is contained in the bill text provided.
The bill's text states its purpose is to provide rules for automatic contribution retirement plans and arrangements, including protections for savers (notice, fee limits, qualified default investments), tools to help employers find certified providers, and incentives (a small-employer credit). The bill also directs Treasury to set up an advisory group to advise on implementing protections and certification.
No publicly available information.