No CRS summary available for this bill.
This section designates the short title of the Act as the “Automatic IRA Act of 2025” and includes a table of contents.
This section defines an "automatic contribution plan or arrangement" under new IRC §414(dd) to include (1) certain employer-sponsored defined contribution plans (i.e., 401(k), 403(b), SIMPLE IRA, or SEP IRA plans) with a qualified cash or deferred arrangement or salary reduction arrangement that meet specified notice, eligibility, contribution, fee, and lifetime income requirements; (2) an automatic IRA arrangement; (3) a payroll deduction IRA under IRC §408(p) meeting specified notice, contribution, investment, and fee requirements; and (4) certain plans in existence on the date of enactment. To qualify, such plans or arrangements must (1) provide notice similar to that required under IRC §401(k)(13)(E); (2) make all employees eligible (excluding those under age 21, certain employees under IRC §410(b)(3), those without up to two years of service with at least 500 hours per year, or students for 403(b) plans), with controlled group rules under IRC §414(b), (c), (m), or (o) and entry dates similar to IRC §410(a)(4); and (3) treat eligible employees as automatically electing employer contributions equal to a "qualified percentage" of compensation (ramping from 6% in the first period to 10% thereafter, up to 15% overall or 10% during an initial period), with opt-out or level-change elections permitted (and, for automatic IRAs, based on the employee's taxable year with payroll deduction contributions treated as elective).
This section establishes a new general business credit under IRC §45BB of $500 per taxable year for eligible small employers during the first three calendar years after enactment in which they participate in an automatic IRA arrangement (i.e., a payroll-deduction IRA with automatic enrollment, as defined in IRC §414(dd)(8) or §4980J(a)(2)). An eligible employer is one with 100 or fewer employees who earned at least $5,000 in the prior year (per IRC §408(p)(2)(C)(i)) and that did not maintain a qualified employer plan (per IRC §4972(d)) during the portion of the current calendar year before commencing the arrangement or the two preceding calendar years. The credit is also specified for certified professional employer organizations (IRC §3511(d)(2)) and applies to taxable years beginning after December 31, 2025.
This section preempts any state law that directly or indirectly prohibits or restricts an automatic IRA arrangement (i.e., an employer-sponsored payroll deduction individual retirement account program with automatic employee enrollment). It further exempts employers maintaining such arrangements from state or local requirements to facilitate payroll deduction savings programs, except to the extent the employer participates in a program under a qualified state law.