Section 1 Short title
This Act may be cited as the “Advancing Auto-Portability Act of 2022”.
Advancing Auto-Portability Act of 2022
A BILL
To amend the Internal Revenue Code of 1986 to provide incentives for the use of automatic portability arrangements under defined contribution plans, and for other purposes.
Sec. 2 Findings
Congress finds as follows:
Up to $105,000,000,000 of retirement savings leaves the defined contribution pension plan system annually because employees cash out their savings after a job change.
Federal law should encourage the private sector to reduce such cash-outs by developing automated solutions to improve defined contribution plan portability.
Sec. 3 Prohibited transaction exemption
by striking “or” at the end of paragraph (22)(I),
by striking the period at the end of paragraph (23) and inserting “, or”, and
by adding at the end the following new paragraph:
“(24) any transaction described in subparagraph (D) or (E) of subsection (c)(1) which consists of the receipt of fees by an automatic portability provider in connection with such provider’s exercise of discretion with respect to an automatic portability transaction.”
Definitions— Section 4975(f) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(12) Rules relating to automatic portability transactions
“(A) In general—For purposes of subsection (d)(24)—
“(i) Automatic portability transaction—An automatic portability transaction is a transfer of assets made—
“(I) from an individual retirement plan which is established on behalf of an individual and to which amounts were transferred under section 401(a)(31)(B)(i),
“(II) to an employer-sponsored retirement plan described in clause (iii), (iv), (v), or (vi) of section 402(c)(8)(B) (other than a defined benefit plan) in which such individual is an active participant, and
“(III) after such individual has been given advance notice of the transfer and has not affirmatively opted out of such transfer.
“(ii) Automatic portability provider—An automatic portability provider is a person that executes transfers described in clause (i).
“(B) Conditions for automatic portability transactions—Subsection (d)(24) shall not apply to an automatic portability transaction unless the following requirements are satisfied:
“(i) Acknowledgment of fiduciary status—An automatic portability provider shall acknowledge in writing, at such time and format as specified by the Secretary, that the provider is a fiduciary with respect to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established.
“(ii) Fees—The fees and compensation received by the automatic portability provider in connection with the automatic portability transaction shall not exceed reasonable compensation and must be approved in writing by the plan fiduciary for the plan described in subparagraph (A)(i)(II).
“(iii) Data usage—The automatic portability provider shall not market or sell data relating to the individual retirement plan described in subparagraph (A)(i)(I).
“(iv) Open participation—The automatic portability provider shall offer automatic portability transactions on the same terms to any plan described in subparagraph (A)(i)(II) regardless of whether the provider provides other services for such plan.
“(v) Pre-transaction notice—At least 30 days in advance of an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established which includes—
“(I) a description of the automatic portability transaction and the fees which will be charged in connection with the transaction,
“(II) a description of the individual’s right to affirmatively elect not to participate in the transaction, the procedures for such an election, and a telephone number at which the individual can contact the automatic portability provider, and
“(III) such other disclosures as the Secretary may require by regulation.
“(vi) Post-transaction notice—Not later than 3 business days after an automatic portability transaction, the automatic portability provider shall provide notice to the individual on whose behalf the individual retirement plan described in subparagraph (A)(i)(I) is established of—
“(I) the actions taken by the automatic portability provider with respect to the individual’s account,
“(II) all relevant information regarding the location and amount of any transferred assets,
“(III) a statement of fees charged against the account by the automatic portability provider or its affiliates in connection with the transfer,
“(IV) a telephone number at which the individual can contact the automatic portability provider, and
“(V) such other disclosures as the Secretary may require by regulation.
“(vii) Notice requirements—The notices required under clauses (v) and (vi) shall be written in a manner calculated to be understood by the average intended recipient and shall not include materially misleading statements.
“(viii) Timeliness of execution—After liquidating the assets of an individual retirement plan described in subparagraph (A)(i)(I) to cash, an automatic portability provider shall transfer the account balance of such plan as soon as practicable to the plan described in subparagraph (A)(i)(II).
“(ix) Record retention and audits
“(I) In general—An automatic portability provider shall, for 6 years, maintain the records sufficient to demonstrate the terms of this subparagraph have been met.
“(II) Audits—An automatic portability provider shall conduct an annual audit of automatic portability transactions occurring during the calendar year to demonstrate compliance with this subparagraph, and shall submit such audit annually to the Secretary, in such form and manner as specified by the Secretary.”
Effective date— The amendments made by this section shall apply to transactions occurring after December 31, 2023.
Sec. 4 Employer automatic portability arrangement tax credit
In general— Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:
“45U. Employer automatic portability arrangement credit
“(a) In general—For purposes of section 38, in the case of an eligible employer, the automatic portability arrangement credit determined under this section for the adoption year is an amount equal to $500.
“(b) Eligible employer—For purposes of this section, the term eligible employer has the meaning given the term by section 408(p)(2)(C)(i) (without regard to subclause (II) thereof).
“(c) Adoption year—For purposes of this section—
“(1) In general—The term adoption year means the taxable year during which the eligible employer adopts an automatic portability arrangement as part of an eligible plan maintained by the employer.
“(2) Automatic portability arrangement
“(A) In general—The term automatic portability arrangement means an arrangement providing for automatic portability transactions.
“(B) Automatic portability transaction—The term automatic portability transaction means a transaction in which amounts distributed pursuant to section 401(a)(31)(B)(i) from a plan to an individual retirement plan established on behalf of an individual are subsequently transferred to an eligible plan in which such individual is an active participant, after such individual has been given advance notice of the transfer and has not affirmatively opted out of such transfer.
“(3) Eligible plan—The term eligible plan means a qualified employer plan as defined in section 4972(d)(1), other than a defined benefit plan.”
Credit To be part of general business credit— Subsection (b) of section 38 of the Internal Revenue Code of 1986 is amended by striking “plus” at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting “, plus”, and by adding at the end the following new paragraph:
“(34) in the case of an eligible employer (as defined in section 45U(b)), the automatic portability arrangement credit determined under section 45U(a).”
Clerical amendment— The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
Effective date— The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.