Sec. 2. Employers required to maintain automatic contribution plan
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Section 414 of the Internal Revenue Code of 1986 is amended by adding at the end the following: For purposes of this title— The term automatic contribution plan means a defined contribution plan that— is described in clause (i), (ii), or
(iv)of section 219(g)(5)(A), is described in paragraph (2), and meets the eligibility, investment, lifetime income, and fee requirements described in paragraphs (3), (4), (5), and (6), respectively, of this subsection. A plan is described in this paragraph if the plan is one of the following: A deferral only arrangement that meets the requirements of section 401(k)(14). b ) plan A 403(b) plan that— meets the requirements of section 401(k)(14), or would be described in subparagraph
(C)without regard to the references to section 416. A plan that— would qualify as a plan described in subparagraph (A), except that such plan allows employer contributions, and satisfies sections 401(k)(3)(A)(ii), 401(m)(2), and 416 taking into account all applicable rules, including— paragraphs (11), (12), and
(13)of section 401(k), paragraphs (10), (11), and
(12)of section 401(m), and section 416(g)(4)(H). A plan described in clause (i), (ii), (iv), (v), or
(vi)of section 219(g)(5)(A) that— is maintained by an employer as of the date of enactment of the Automatic Retirement Plan Act of 2017 , has been maintained by such employer (or a predecessor employer) for at least 1 year before such date of enactment, and except as provided by the Secretary, has not had its coverage or benefits substantially decreased for any plan year beginning after such date of enactment. Subject to subparagraph (B), the eligibility requirements described in this paragraph are that all employees of the employer are eligible to participate in an automatic contribution plan maintained by the employer. Subparagraph
(A)shall not apply to the following: The employer may, but need not, include an employee who has not attained age 21 in an automatic contribution plan maintained by the employer. The employer may, but need not, include an employee described in section 410(b)(3) in an automatic contribution plan maintained by the employer. No employee may be treated as ineligible in an automatic contribution plan maintained by the employer solely by reason of working on a part-time, temporary, or seasonal basis, except as otherwise provided in this subparagraph. The employer may, but need not, exclude an employee from an automatic contribution plan maintained by the employer until the first day of the second calendar month beginning on or after the day the individual begins work for the employer. The employer may, but need not, exclude an employee from an automatic contribution plan maintained by the employer to the extent that such employee is not expected to work during more than three months during the 12-month period starting when such employee would otherwise be required to be eligible under such plan. Eligible employees within an employer need not be eligible to participate in the same automatic contribution plan. 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. This paragraph shall not apply to a plan described in paragraph (2)(D) until the sixth plan year beginning on or after the date of enactment of the Automatic Retirement Plan Act of 2017 . In the case of an eligible employer (as defined in section 408(p)(2)(C)(i)), eighth shall be substituted for sixth in the preceding sentence. Except in the case of a plan that is an automatic contribution plan by reason of paragraph (2)(D), any investment made in the absence of an investment election by a participant or beneficiary shall be invested in accordance with regulations prescribed by the Secretary of Labor under section 404(c)(5) of the Employee Retirement Income Security Act of 1974. Except in the case of a plan that is an automatic contribution plan by reason of paragraph (2)(D), the lifetime income requirements described in this paragraph are— A plan shall not be treated as an automatic contribution plan unless the plan 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). This paragraph shall not apply with respect to any participant whose vested account balance is $5,000 or less at the time of distribution. Under the fee requirements of this paragraph, no participant may be charged unreasonable fees solely on the basis that the participant’s balance in an automatic contribution plan is small or solely on the basis that adoption of such a plan by the employee’s employer is mandatory. . Chapter 43 of such Code is amended by adding at the end the following new section: There is hereby imposed a tax on the failure of an employer to make eligible to participate in an automatic contribution plan maintained by the employer any employee of the employer who, under the terms of section 414(aa), would be required to be eligible to participate in an automatic contribution plan maintained by the employer. Paragraph
(1)shall not apply to an employer to the extent such employer participates in an arrangement under a qualified State law under section 514(f)(2) of the Employee Retirement Income Security Act of 1974. Paragraph
(1)shall not apply to an employer with respect to any employee who is eligible to participate in a different automatic contribution plan than one or more other employees of the employer. 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. For purposes of this section, the term noncompliance period means, with respect to any failure, the period— beginning on the date such failure first occurs, and ending on the earlier of— the date such failure is corrected, or 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 maintained by such employer. 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 that such failure existed. 9 months ½ No tax shall be imposed by subsection
(a)on any failure if— such failure was due to reasonable cause and not to willful neglect, and such failure is corrected during the 9 ½ -month period beginning on the first date any of the persons referred to in subsection
(e)knew that such failure existed. In the case of failures which are due to reasonable cause and not to willful neglect— The tax imposed by subsection
(a)for failures during the taxable year of the employer shall not exceed $500,000. 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. 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. This section shall not apply in the case of— any failure of an employer to meet the requirements of subsection
(a)with respect to any employee if the failure with respect to such employee occurred during the calendar year immediately following a calendar year during which all employers maintaining such plan normally employed 10 or fewer employees on a typical business day, any governmental plan (within the meaning of section 414(d)), any church plan (within the meaning of section 414(e)), or employers that have not been in existence for three years, taking into account all predecessor employers. 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). For purposes of this section— the term automatic contribution plan has the meaning given such term under section 414(aa), and the term employer includes all employers treated as a single employer under subsection (b), (c), (m), or
(o)of section 414. . The table of sections for chapter 43 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 4980J. Failure to maintain automatic contribution plan. . The amendments made by subsection
(a)shall apply to years beginning after December 31, 2017. Except as provided in subparagraph (B), the amendments made by subsections
(b)and
(c)shall apply to years beginning after December 31, 2019. In the case of an eligible employer (as defined in section 408(p)(2)(C)(i) of the Internal Revenue Code of 1986), the amendments made by subsections
(b)and
(c)shall apply to years beginning after December 31, 2021.