Section 1 Short title
This Act may be cited as the “Portable Retirement and Investment Account Act of 2018” or the “PRIA Act of 2018”.
Portable Retirement and Investment Account Act of 2018
A BILL
To create portable retirement and investment accounts for all Americans, and for other purposes.
Sec. 2 Portable Retirement and Investment Account Board
Establishment— There is established a Portable Retirement and Investment Board (referred to in this Act as the “Board”) to be headed by a Director (referred to in this Act as the “Director”).
Membership—
In general— The Board shall consist of—
3 members appointed by the Secretary of the Treasury;
3 members appointed by the Secretary of Labor;
2 members appointed by the Pension Benefit Guaranty Corporation; and
1 member appointed by the Director of the Bureau of Consumer Financial Protection.
Deadline for appointment— The appointments described under paragraph (1) shall be made not later than 1 year after the date of the enactment of this Act.
Limitation— In making appointments under paragraph (1), the officials making such appointments shall coordinate to ensure that not more than 5 members of the same political party may serve on the Board at the same time.
Terms of office— Each member of the Board shall hold office for a term of 5 years and shall continue in office until his successor is appointed in the same manner as the original appointment was made. The terms of office of the members of the Board first taking office after the date of the enactment of this Act shall expire as follows: one at the end of 1 year, two at the end of 2 years, two at the end of 3 years, two at the end of 4 years, and two at the end of 5 years.
Vacancies— Each member of the Board shall continue in office until his successor is appointed in the same manner as the original appointment was made. Any vacancy on the Board shall be filled in the same manner as the initial appointment was made, and members of the Board appointed to fill vacancies shall be appointed for the remainder of such term.
Director—
In general— The Director shall be selected by the President from among the members of the Board.
Authority to issue regulations— The Director is authorized to issue such regulations or other guidance as the Director determines are necessary to carry out the purposes of this Act.
Sec. 3 Contracts to provide portable retirement and investment accounts
In general— Not later than 1 year after the date of the enactment of this Act, the Director shall establish a program under which the Director shall award one contract each year on a competitive basis to an entity in the private sector to act as trustee of all portable retirement and investment accounts (as defined in section 223A of the Internal Revenue Code of 1986) established pursuant to section 4(a)(2) during such year. Each amount in a portable retirement and investment account provided by a trustee pursuant to a contract under this subsection shall be invested in a lifecycle fund provided by the trustee as described in subsection (c). In awarding contracts to entities under this subsection, the Director shall consider—
the specific composition of the lifecycle funds provided by such trustee;
the services to account holders offered by such trustee, including available investment advice;
the fees charged by such trustee; and
the importance of maintaining a diversity of trustees.
Certification of trustees— The Director may not award a contract to an entity under subsection (a) unless the Director has certified such entity under this subsection. The Director shall establish certification criteria which shall include the following:
Expertise, including the professional qualifications, business model, experience, and training of the trustee and any service providers that the trustee intends to use.
Registration, licensing, and financial soundness demonstrating that participant funds would be handled by a regulated financial entity.
Reputation and customer service, including records of comments or complaints from employers and participants, timely consideration and resolution of complaints filed, and independent rating or accreditations.
Lifecycle fund— A lifecycle fund described in this subsection is a fund that—
is comprised of an appropriate mix of index funds;
is automatically adjusted over time during the time horizon of the fund;
strikes a balance between expected risk and return over the time horizon of the fund; and
has an initial target retirement date that is consistent with retirement at age 65.
Fiduciary responsibility— A trustee of a portable retirement and investment account shall act as a fiduciary to the account holder and shall discharge his duties with respect to the account in the sole interest of the account holder under rules similar to those applicable to an ERISA fiduciary under section 404 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1104).
Sec. 4 Establishment; contributions
Establishment—
Portable Retirement and Investment Account Fund— There is established in the Treasury the Portable Retirement and Investment Account Fund (in this Act referred to as the “Fund”). The Board shall, to the greatest extent practicable and consistent with the requirements of this Act, manage the Fund in the same manner as the Thrift Savings Fund established under section 8437 of title 5, United States Code.
Accounts— For each individual for whom a notification is made under clause (iv) of section 205(c)(2)(B) of the Social Security Act (42 U.S.C. 405(c)(2)(B)), as added by paragraph (3), or whose name is included on the list submitted under paragraph (4), not later than 90 days after such notification or submission, the Director shall establish, with such individual as the sole beneficiary, a portable retirement and investment account within the Fund.
Notification of issuance of social security account number—
In general— Section 205(c)(2)(B) of the Social Security Act (42 U.S.C. 405(c)(2)(B)) is amended by adding at the end the following:
“(iv) Not later than 60 days after assigning a social security account number to an individual, the Commissioner of Social Security shall notify the Director of the Portable Retirement and Investment Account Board of such assignment.”
Effective date— The amendment made by subparagraph (A) shall apply with respect to social security account numbers assigned after a certain date, to be designated by the Director, occurring not later than 3 years after the date of the enactment of this Act.
Transition— Not later than the date designated pursuant to paragraph (3)(B), occurring not later than 3 years after the date of the enactment of this Act, the Commissioner of Social Security shall submit to the Director a list of the name of each living individual who has been assigned a social security account number.
Federal contributions—
In general— In the case of an individual for whom a notification is made under clause (iv) of section 205(c)(2)(B) of the Social Security Act (42 U.S.C. 405(c)(2)(B)), as added by subsection (a)(3), who is a child of a taxpayer who received a credit against tax under section 32 of the Internal Revenue Code of 1986 for the most recent taxable year ending before the date of the notification under such subsection, the Director shall deposit into the portable retirement and investment account of the individual an amount determined under paragraph (2).
Amount— Subject to paragraph (3), the amount determined under this paragraph is—
in the case of a taxpayer eligible for the maximum credit applicable to such individual under section 32 of the Internal Revenue Code of 1986, the applicable contribution amount; and
in any other case, a lower amount to be determined under regulations issued by the Secretary of the Treasury to reflect a proportional reduction of such amount as the credit under such section decreases.
Applicable contribution amount—
In general— For purposes of this subsection, the term “applicable contribution amount” means $500.
Inflation adjustment— In the case of any taxable year beginning in a calendar year after 2020, the dollar amount in subparagraph (A) shall be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code of 1986 for the calendar year in which the taxable year begins, by substituting “calendar year 2019” for “calendar year 2016” in subparagraph (A)(ii) thereof.
Contribution for transfer— A beneficiary of a portable retirement and investment account, or in the case of a beneficiary who has not attained the age of 18, the parent or guardian of such beneficiary, may elect at any time to transfer the entire amount in the account to a portable retirement and investment account in the private sector. Such account shall be held by a custodial entity such as a bank, credit union, trust company or an entity that is licensed and regulated by the Secretary pursuant to requirements consistent with section 1.408–2e of title 26, Code of Federal Regulations. Upon such election, the Director shall provide for a $50 deposit if the beneficiary completes a financial literacy training, as determined appropriate by the Director. Investments in such accounts are not subject to the limitation to lifecycle funds described in section 3.
Personal contributions—
In general— The beneficiary of a portable retirement and investment account may at any time contribute additional funds for deposit into such account.
Direct deposit— Any employer who permits wages to be paid to an employee by electronic funds transfer shall permit such employee to elect to deposit, by means of electronic funds transfer, a portion of such wages specified by the employee into the employee’s portable retirement and investment account.
Automatic contribution arrangement— Any employer may provide that an employee is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation disclosed in advance to the employee until the employee specifically elects not to have such contributions made (or specifically elects to have such contributions made at a different percentage).
Supersedure— Paragraph (4) shall supercede any law of any State (within the meaning of section 514(c)(1) of title 29) which would directly or indirectly prohibit an employer from adopting an arrangement described in paragraph (4). The Director may prescribe regulations which would establish minimum standards that such an arrangement would be required to satisfy in order for this paragraph to apply in the case of such arrangement.
Employer contributions— The employer of a beneficiary of a portable retirement and investment account may at any time contribute additional funds for deposit into such account.
Transfer option—
In general— A beneficiary of a portable retirement and investment account (or, in the case of a beneficiary who is under 18 years of age, the parent or guardian of the beneficiary) may elect at any time to transfer the entire amount in such portable retirement and investment account to any portable retirement and investment account in the private sector (as defined in section 223A of the Internal Revenue Code of 1986) with such beneficiary as the sole beneficiary.
Notifications—
Statements— The Director shall ensure that account statements are delivered to the beneficiary of a portable retirement and investment account by electronic delivery to the extent practicable.
Notice of transfer option— When the amount in a portable retirement and investment account first exceeds $15,000 and when the beneficiary of the account attains the age of 18, the Director shall notify the beneficiary of the account of the option under paragraph (3) to transfer the entire amount in such account to another account.
Sec. 5 Tax treatment
In general— Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 223 the following new section:
“223A. Portable retirement and investment accounts
“(a) Deduction allowed
“(1) In general—There shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year to a portable retirement and investment account by the account beneficiary.
“(2) Certain rules to apply—Rules similar to section 219(d)(2) (relating to no deduction for rollovers) shall apply for purposes of this section.
“(b) Maximum amount of deduction
“(1) In general—The amount allowable as a deduction under subsection (a) to any individual for any taxable year shall not exceed the lesser of—
“(A) $18,500, or
“(B) an amount equal to the compensation includible in the individual’s gross income for such taxable year.
“(2) Catch-up contributions for individuals 50 or older—In the case of an individual who has attained the age of 50 before the close of the taxable year, the amounts described in paragraph (1)(A) and subsection (c)(4) for such taxable year shall be increased by $6,000.
“(c) Portable retirement and investment account—For purposes of this title, the term “portable retirement and investment account” means a trust created or organized in the United States for the exclusive benefit of an individual, but only if the written governing instrument creating the trust meets the following requirements:
“(1) The trustee is a bank (as defined in section 408(n) of the Internal Revenue Code of 1986) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section.
“(2) The amounts in the trust may consist only of—
“(A) deposits under section 4(b) of the Portable Retirement and Investment Account Act of 2018,
“(B) amounts described in subsection (a)(1),
“(C) amounts deposited by an employer of the account beneficiary,
“(D) interest on amounts in such trust, and
“(E) proceeds from investment of amounts in such trust.
“(3) Except in the case of a rollover contribution described in subsection (d)(4), no contribution will be accepted unless it is in cash.
“(4) No contributions in excess of the amount that is twice the dollar amount in effect under subsection (b)(1)(A) will be accepted during a calendar year.
“(5) No distribution that would bring the account balance below the amount deposited in such trust under section (b)(1) of the PRIA Act of 2018 is allowed to an account beneficiary who has not attained the age 59½.
“(d) Tax treatment of accounts
“(1) In general—A portable retirement and investment account is exempt from taxation under this subtitle unless such account has ceased to be a portable retirement and investment account. Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).
“(2) Account terminations—Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to portable retirement and investment accounts, and subsection (e)(2) shall not apply to any amount treated as distributed under such rules.
“(e) Tax treatment of distributions
“(1) In general—Any amount paid or distributed out of a portable retirement and investment account shall be included in the gross income of such beneficiary.
“(2) Additional tax on certain distributions—The tax imposed by this chapter on the account beneficiary for any taxable year in which there is a payment or distribution from a portable retirement and investment account of such beneficiary shall be increased by 10 percent unless such payment or distribution is—
“(A) paid or distributed on or after the date on which the account beneficiary attains age 59½,
“(B) paid or distributed to an account beneficiary who is disabled within the meaning of subsection (m)(7), or
“(C) paid or distributed to an account beneficiary who has attained age 55 and becomes unemployed after attaining such age.
“(3) Certain distributions not taxed
“(A) In general—Paragraphs (1) and (2) shall not apply to any amount paid or distributed from a portable retirement and investment account to the account beneficiary to the extent the amount received is paid into a portable retirement and investment account, or for an annuity, for the benefit of such beneficiary not later than the 60th day after the day on which the beneficiary receives the payment or distribution.
“(B) Limitation—This paragraph shall not apply to any amount described in subparagraph (A) received by an individual from a portable retirement and investment account if, at any time during the 1-year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from a portable retirement and investment account which was not includible in the individual’s gross income because of the application of this paragraph.
“(4) Transfer of account incident to divorce—The transfer of an individual’s interest in a portable retirement and investment account to an individual’s spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest shall, after such transfer, be treated as a portable retirement and investment account with respect to which such spouse is the account beneficiary.
“(5) Treatment after death of account beneficiary
“(A) Treatment if designated beneficiary is spouse—If the account beneficiary’s surviving spouse acquires such beneficiary’s interest in a portable retirement and investment account by reason of being the designated beneficiary of such account at the death of the account beneficiary, such portable retirement and investment account shall be treated as if the spouse were the account beneficiary.
“(B) Other cases—If, by reason of the death of the account beneficiary, any person acquires the account beneficiary’s interest in a portable retirement and investment account in a case to which subparagraph (A) does not apply—
“(i) such account shall cease to be a portable retirement and investment account as of the date of death, and
“(ii) an amount equal to the fair market value of the assets in such account on such date shall be includible if such person is not the estate of such beneficiary, in such person’s gross income for the taxable year which includes such date, or if such person is the estate of such beneficiary, in such beneficiary’s gross income for the last taxable year of such beneficiary.
“(f) Loans treated as distributions—For purposes of this section—
“(1) In general—If during any taxable year a participant or beneficiary receives (directly or indirectly) any amount as a loan from a portable retirement and investment account, such amount shall be treated as having been received by such individual as a distribution from such account.
“(2) Exception for certain loans
“(A) General rule—Paragraph (1) shall not apply to any loan to the extent that such loan (when added to the outstanding balance of all other loans from such account), does not exceed the lesser of—
“(i) $50,000, reduced by the excess (if any) of—
“(I) the highest outstanding balance of loans from the account during the 1-year period ending on the day before the date on which such loan was made, over
“(II) the outstanding balance of loans from the plan on the date on which such loan was made, or
“(ii) the greater of—
“(I) one-half of the amount in the account, or
“(II) $10,000.
“(B) Requirement that loan be repayable within 5 years
“(i) In general—Subparagraph (A) shall not apply to any loan unless such loan, by its terms, is required to be repaid within 5 years.
“(ii) Exception for home loans—Clause (i) shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant.
“(C) Requirement of level amortization—Except as provided in regulations, this paragraph shall not apply to any loan unless substantially level amortization of such loan (with payments not less frequently than quarterly) is required over the term of the loan.
“(g) Employer deductions
“(1) In general—For deductions related to employer contributions, see section 162.
“(2) Nondiscrimination—Under regulations prescribed by the Secretary, notwithstanding section 162, no deduction shall be allowed for employer contributions to a portable retirement and investment account on behalf of an employee who is a highly compensated employee (as defined in section 414(q) 105(h)(5)) if the employer contributions made on behalf of all employees discriminate in favor of such employees who are highly compensated employees.
“(3) Certain controlled groups—All employees who are treated as employed by a single employer under subsection (b), (c), and (m) of section 414 shall be treated as employed by a single employer for purposes of this subsection.
“(h) Inflation adjustment
“(1) In general—In the case of any taxable year beginning in a calendar year after 2020, the dollar amounts under subsection (b) and subsection (c)(4) shall be increased by an amount equal to—
“(A) such dollar amount, multiplied by
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2019” for “calendar year 2016” in subparagraph (A)(ii) thereof.
“(2) Rounding rules—If any amount after adjustment under paragraph (1) is not a multiple of $500, such amount shall be rounded to the next lower multiple of $500.”
Clerical amendments— The table of sections for chapter 1 is amended by inserting after the item related to section 223 the following new item:
Sec. 6 Option to rollover
Rollover option—
In general— Any individual who holds an account described under paragraph (2) may elect to roll over the entire amount in such account into a portable retirement and investment account. Such rollover shall be treated as a rollover described in section 223A(e)(4) of the Internal Revenue Code of 1986.
Accounts described— This subsection shall apply to accounts opened or annuity contracts purchased pursuant to the following sections of the Internal Revenue Code of 1986:
Section 401(k).
Section 403(b).
Section 457.
Section 409A.
Section 408.
Sec. 7 Regulations
Not later than 180 days after the date of the enactment of this Act, the Secretary of the Treasury, in coordination with the Commissioner of Social Security, as determined necessary by the Secretary, shall issue regulations to carry out this section.