Automatic IRA Act of 2025
Sponsors
Legislative Progress
In CommitteeMr. Neal introduced the following bill; which was referred to …
Summary
What This Bill Does
The Automatic IRA Act of 2025 requires most employers with more than 10 employees to offer automatic retirement savings accounts to workers who don't already have access to employer-sponsored retirement plans. Employees would be automatically enrolled with payroll deductions starting at 6% of their pay (escalating to 10% over time), but can opt out at any time. The goal is to address the retirement savings gap for the roughly 57 million American workers whose employers don't offer 401(k) or similar plans.
Who Benefits and How
- Workers without retirement plans gain automatic access to retirement savings through payroll deductions, with funds defaulting to Roth IRAs for tax-free growth.
- Small businesses with 100 or fewer employees receive a $500 annual tax credit for 3 years when they set up these arrangements.
- Financial services companies (IRA custodians, investment fund providers, payroll processors) gain millions of new customers and accounts to manage.
- States with existing auto-IRA programs (California, Oregon, Illinois, etc.) can continue their programs if enacted before 2028.
Who Bears the Burden and How
- Employers with more than 10 employees must set up and administer automatic IRA arrangements or face penalties of $10 per day per employee (up to $500,000 annually). This creates new compliance and administrative costs.
- The Treasury Department must establish an Automatic IRA Advisory Group, create a certification process for providers, build a website for employer/employee use, and monitor compliance.
- States that want to create new auto-IRA programs after 2027 face federal preemption of their efforts.
- Federal taxpayers bear the cost of the $500 tax credits for participating small employers.
Key Provisions
- Automatic enrollment at 6% of pay, escalating to 10%+ over subsequent years, with 15% maximum
- Default to Roth IRA (tax-free growth) unless employee chooses traditional IRA
- 90-day penalty-free withdrawal window for new participants who change their mind
- Exemptions for very small employers (10 or fewer employees), churches, governments, and startups under 2 years old
- Preempts conflicting state laws but protects existing state auto-IRA programs enacted before 2028
- Creates new Treasury Advisory Group to ensure low fees and proper provider certification
Evidence Chain:
This summary is derived from the structured analysis below. See "Detailed Analysis" for per-title beneficiaries/burden bearers with clause-level evidence links.
Primary Purpose
Establishes a federal requirement for employers to offer automatic IRA (Individual Retirement Account) arrangements to employees who do not have access to employer-sponsored retirement plans, with automatic payroll deductions and opt-out provisions.
Policy Domains
Legislative Strategy
"Expand retirement savings coverage by mandating employer-facilitated automatic IRA arrangements for workers without existing retirement plans, using automatic enrollment with escalating contribution rates and opt-out provisions, while providing tax credits to small employers and preempting conflicting state laws."
Likely Beneficiaries
- Workers without employer-sponsored retirement plans (gain access to automatic retirement savings)
- Small employers with 100 or fewer employees (receive annual tax credit for 3 years)
- Financial services industry (IRA custodians, trustees, investment fund providers gain new customers)
- States with existing auto-IRA programs enacted before 2028 (programs remain valid under qualified State law exception)
Likely Burden Bearers
- Employers with more than 10 employees (must maintain or facilitate automatic contribution plans or face /day/employee penalty)
- Employers in states with conflicting laws (state programs preempted unless qualified State law)
- Professional employer organizations (cannot claim responsibility for client company employees)
- Treasury Department (must establish Advisory Group, certification processes, and compliance monitoring)
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_secretary"
- → Secretary of the Treasury
- "advisory_group"
- → Automatic IRA Advisory Group
- "the_secretary"
- → Secretary of the Treasury
Key Definitions
Terms defined in this bill
The period beginning when a failure to maintain/facilitate an automatic contribution plan first occurs and ending when corrected or 3 months after the employee should have been eligible to participate.
A defined contribution plan described in IRC 219(g)(5)(A) that includes a qualified cash or deferred arrangement or salary reduction arrangement and meets notice, eligibility, contribution, fee, and lifetime income requirements; OR an automatic IRA arrangement; OR a SIMPLE plan meeting certain requirements; OR grandfathered plans established before enactment.
An arrangement facilitated by an employer under which employees may elect payroll deduction contributions to an individual retirement account, are automatically enrolled unless they opt out, and may modify contribution levels and investment choices.
An employer that facilitates an automatic IRA arrangement, has no more than 100 employees earning at least ,000 annually (per IRC 408(p)(2)(C)(i)), and did not maintain a qualified employer plan in the preceding 2 calendar years.
A state law enacted before January 1, 2028 that requires certain employers to facilitate an automatic IRA arrangement pursuant to a state payroll deduction savings program.
The automatic contribution percentage starting at 6% in year 1, escalating annually: 7% (year 2), 8% (year 3), 9% (year 4), 10%+ (subsequent years), with a maximum cap of 15% (10% in initial period).
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology