Automatic IRA Act of 2025

Bill Number

H.R. 6722

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-12-15: Referred to the House Committee on Ways and Means.

Last Updated

2026-01-09T09:06:59Z

AI-Generated Summary

Purpose The legislation amends the Internal Revenue Code of 1986 to establish rules for automatic contribution retirement plans and arrangements. Its primary goal is to increase retirement savings by requiring most employers to offer automatic enrollment options, including automatic IRA arrangements, while providing incentives for small employers and protections against unreasonable fees.

Key Provisions

• Definition and Requirements for Automatic Contribution Plans or Arrangements: Creates a new category under section 414(dd) that includes qualified defined contribution plans with auto-enrollment features, automatic IRA arrangements, certain SIMPLE plans, and existing plans. Plans must meet standards for:
• Notice (similar to section 401(k)(13)(E)).
• Eligibility (all employees generally covered, with limited exclusions for age, service, or other factors).
• Contributions (default elective contributions starting at 6% and escalating to 10%, with opt-out rights).
• Investments (default to target-date or lifecycle funds; automatic IRAs must offer additional options like principal preservation).
• Fees (must be reasonable for non-ERISA plans).
• Lifetime income (option for at least 50% of balance in annuity form, with exceptions for small balances).
• Automatic IRA Arrangements: Employers facilitate payroll deduction contributions to IRAs, defaulting to Roth IRAs. Includes rules for timely deposits, model notices, a Treasury website for provider information, certification of arrangements, and options for employee-directed accounts.
• Excise Tax for Noncompliance: New section 4980J imposes a $10 daily tax per affected employee for failure to offer required plans, with exceptions for small employers (10 or fewer), new businesses, government/church plans, and corrections within set periods. Caps apply for unintentional failures.
• Tax Credit: New section 45BB provides a $500 credit for eligible small employers (under section 408(p)(2)(C)(i)) offering automatic IRA arrangements for the first three years.
• State Law Treatment: Preempts state laws restricting automatic IRAs but allows "qualified state laws" enacted before 2028 that mandate state payroll deduction programs.
• Other Rules: Waives early withdrawal penalties for certain initial distributions; establishes an Automatic IRA Advisory Group; applies to plan years after December 31, 2027 (credit applies after 2025).

Significant Changes to Existing Law

• Introduces mandatory automatic enrollment and contribution rules for a broad range of employers, shifting from voluntary participation in many cases.
• Creates a new excise tax regime for non-compliance with retirement plan facilitation requirements.
• Establishes federal standards and certification for automatic IRAs, including default investment and fee rules not previously codified.
• Provides preemption of conflicting state laws while grandfathering certain existing state programs.
• Adds a targeted tax credit and modifies penalty rules under sections 72(t) and 4975.

Potential Impacts

• Government Agencies: Increases administrative responsibilities for the IRS and Treasury Department, including maintaining a website, certifying providers, issuing model notices, and overseeing an advisory group.
• Citizens: Expands access to retirement savings vehicles for employees of small and mid-sized employers, potentially improving long-term financial security through default contributions and low-cost options.
• International Relations: No direct effects identified in the legislation.

Main Stakeholders Affected

• Employers, particularly small businesses and those without existing plans.
• Employees, especially those previously without workplace retirement options.
• IRA trustees, custodians, and investment providers.
• States operating or planning payroll deduction savings programs.
• The Department of the Treasury and IRS.

Notable Legal, Constitutional, or Political Implications

• Raises federalism considerations through preemption of state laws on payroll deduction programs, potentially limiting state authority in this area.
• Imposes new federal mandates on private employers with associated penalties, which could prompt challenges regarding regulatory scope.
• Includes provisions for professional employer organizations and controlled groups to clarify liability.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Neal, Richard E. [D-MA-1]

Cosponsors (2)

Rep. Davis, Danny K. [D-IL-7], Rep. Sánchez, Linda T. [D-CA-38]

Recent Actions

• 2025-12-15: Referred to the House Committee on Ways and Means.
• 2025-12-15: Introduced in House
• 2025-12-15: Introduced in House

Bill Versions

• Automatic IRA Act of 2025 — issued 2025-12-15 — PDF (36 pages)