Automatic IRA Act of 2024

This bill amends the Internal Revenue Code to create rules for automatic contribution retirement plans and arrangements, including a new type of automatic IRA arrangement for employees, and provides a tax credit for small employers that offer such arrangements. It also preempts certain state laws that would restrict these automatic IRA arrangements.

Sec. 2, Automatic contribution plan or arrangement: This section defines an automatic contribution plan or arrangement as a retirement plan or IRA arrangement that meets specific notice, eligibility, contribution, investment, fee, and lifetime income requirements. It requires automatic enrollment of eligible employees at a default contribution rate starting at 6% and increasing annually up to 10%, with an option to opt out. It also sets rules for default investments, limits on fees, and lifetime income options. For automatic IRA arrangements, it details payroll deduction contributions, default treatment as a Roth IRA, and administrative requirements for employers, including a model notice and a website for information.

Sec. 3, Credit for certain small employer automatic IRA arrangements: This section creates a new tax credit of $500 per year for the first three years for eligible small employers that facilitate an automatic IRA arrangement. An eligible employer is one that did not maintain a retirement plan in the prior two years and meets certain size criteria. The credit is part of the general business credit and applies to taxable years beginning after December 31, 2024.

Sec. 4, Treatment of automatic IRA arrangements under State law: This section provides that the bill and its amendments supersede any state law that would directly or indirectly prohibit or restrict an automatic IRA arrangement. It also states that employers maintaining such an arrangement are not subject to any state or local requirement to facilitate a state payroll deduction savings program, with an exception for arrangements under a qualified state law.