II
115th CONGRESS
1st Session
S. 1383
IN THE SENATE OF THE UNITED STATES
June 20, 2017
Ms. Collins (for herself and Mr. Nelson) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to modify safe harbor requirements applicable to automatic contribution arrangements, and for other purposes.
Short title
This Act may be cited as the Retirement Security Act of 2017
.
Multiple employer plans
Qualification requirements
In general
Section 413 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
Application of qualification requirements for certain multiple employer plans with pooled plan providers
In general
Except as provided in paragraph (2), if a defined contribution plan to which subsection (c) applies—
is sponsored by employers all of which have both a common interest other than having adopted the plan and control of the plan, or
in the case of a plan not described in subparagraph (A), has a pooled plan provider,
Limitations
In general
Paragraph (1) shall not apply to any plan unless the terms of the plan provide that in cases of employers failing to take the actions described in paragraph (1)—
the assets of the plan attributable to employees of the employer will be transferred to a plan maintained only by the employer (or its successor), to an eligible retirement plan as defined in section 402(c)(8)(B) for each individual whose account is transferred, or to any other arrangement that the Secretary determines is appropriate, unless the Secretary determines it is in the best interests of such employees to retain the assets in the plan, and
the employer described in clause (i) (and not the plan with respect to which the failure occurred or any other participating employer in such plan) shall, except to the extent provided by the Secretary, be liable for any liabilities with respect to such plan attributable to employees of the employer.
Failures by pooled plan providers
If the pooled plan provider of a plan described in paragraph (1)(B) does not perform substantially all of the administrative duties which are required of the provider under paragraph (3)(A)(i) for any plan year, the Secretary, in the Secretary's own discretion, may provide that the determination as to whether the plan meets the requirements under this title applicable to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, shall be made in the same manner as would be made without regard to paragraph (1).
Pooled plan provider
For purposes of this subsection—
In general
The term pooled plan provider means, with respect to any plan, a person who—
is designated by the terms of the plan as a named fiduciary (as defined in section 402(a)(2) of the Employee Retirement Income Security Act of 1974), as the plan administrator, and as the person responsible to perform all administrative duties (including conducting proper testing with respect to the plan and employees of each participating employer) which are reasonably necessary to ensure that—
the plan meets any requirement applicable under the Employee Retirement Income Security Act of 1974 or this title to a plan described in section 401(a) or to a plan that consists of individual retirement accounts described in section 408 (including by reason of subsection (c) thereof), whichever is applicable, and
each participating employer takes such actions as the Secretary or such person determines are necessary for the plan to meet the requirements described in subclause (I), including providing to such person any disclosures or other information which the Secretary may require or which such person otherwise determines is necessary to administer the plan or to allow the plan to meet such requirements,
registers as a pooled plan provider with the Secretary, and provides such other information to the Secretary as the Secretary may require, before beginning operations as a pooled plan provider,
acknowledges in writing that such person is a named fiduciary (within the meaning of section 402(a)(2) of the Employee Retirement Income Security Act of 1974), and the plan administrator, with respect to the plan, and
is responsible for ensuring that all persons who handle assets of, or who are fiduciaries of, the plan are bonded in accordance with section 412 of the Employee Retirement Income Security Act of 1974.
Audits, examinations and investigations
The Secretary may perform audits, examinations, and investigations of pooled plan providers as may be necessary to enforce and carry out the purposes of this subsection.
Guidance
In general
The Secretary shall issue such guidance as the Secretary determines appropriate to carry out this subsection, including guidance—
to identify the administrative duties and other actions required to be performed by a pooled plan provider under this subsection,
which describes the procedures to be taken to terminate a plan which fails to meet the requirements to be a plan described in paragraph (1), including the proper treatment of, and actions needed to be taken by, any participating employer of the plan and the assets and liabilities of the plan with respect to employees of that employer, and
identifying appropriate cases to which the rules of paragraph (2)(A) will apply to employers failing to take the actions described in paragraph (1).
Prospective application
Any guidance issued by the Secretary under this paragraph shall not apply to any action or failure occurring before the issuance of such guidance.
Model plan
The Secretary shall, in consultation with the Secretary of Labor when appropriate, publish model plan language which meets the requirements of this subsection and of paragraphs (43) and (44) of section 3 of the Employee Retirement Income Security Act of 1974 and which may be adopted in order for a plan to be treated as a plan described in paragraph (1)(B).
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Conforming amendment
Paragraph (3) of section 413(b) of such Code is amended by striking section 401(a)
and inserting sections 401(a) and 408(c)
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Technical amendment
Subsection (c) of section 408 of such Code is amended by inserting after paragraph (2) the following new paragraph:
There is a separate accounting for any interest of an employee or member (or spouse of an employee or member) in a Roth IRA.
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No common interest required for pooled employer plans
Section 3(2) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(2)) is amended by adding at the end the following:
A pooled employer plan shall be treated as—
a single employee pension benefit plan or single pension plan; and
a plan to which section 210(a) applies.
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Pooled employer plan and provider defined
In general
Section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is amended by adding at the end the following:
Pooled employer plan
In general
The term pooled employer plan means a plan—
which is an individual account plan established or maintained for the purpose of providing benefits to the employees of 2 or more employers;
which is a plan described in section 401(a) of the Internal Revenue Code of 1986 which includes a trust exempt from tax under section 501(a) of such Code or a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof); and
the terms of which meet the requirements of subparagraph (B).
Requirements for plan terms
The requirements of this subparagraph are met with respect to any plan if the terms of the plan—
designate a pooled plan provider and provide that the pooled plan provider is a named fiduciary of the plan;
designate one or more trustees meeting the requirements of section 408(a)(2) of the Internal Revenue Code of 1986 (other than a participating employer) to be responsible for collecting contributions to, and holding the assets of, the plan and require such trustees to implement written contribution collection procedures that are reasonable, diligent, and systematic;
provide that each participating employer retains fiduciary responsibility for—
the selection and monitoring in accordance with section 404(a) of the person designated as the pooled plan provider and any other person who, in addition to the pooled plan provider, is designated as a named fiduciary of the plan; and
to the extent not otherwise delegated to another fiduciary by the pooled plan provider and subject to the provisions of section 404(c), the investment and management of that portion of the plan’s assets attributable to the employees of that participating employer;
provide that a participating employer, or a participant or beneficiary, is not subject to unreasonable restrictions, fees, or penalties with regard to ceasing participation, receipt of distributions, or otherwise transferring assets of the plan in accordance with section 208 or paragraph (44)(C)(i)(II);
require—
the pooled plan provider to provide to participating employers any disclosures or other information which the Secretary may require, including any disclosures or other information to facilitate the selection or any monitoring of the pooled plan provider by participating employers; and
each participating employer to take such actions as the Secretary or the pooled plan provider determines are necessary to administer the plan or for the plan to meet any requirement applicable under this Act or the Internal Revenue Code of 1986 to a plan described in section 401(a) of such Code or to a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof), whichever is applicable, including providing any disclosures or other information which the Secretary may require or which the pooled plan provider otherwise determines is necessary to administer the plan or to allow the plan to meet such requirements; and
provide that any disclosure or other information required to be provided under clause (v) may be provided in electronic form and will be designed to ensure only reasonable costs are imposed on pooled plan providers and participating employers.
Exceptions
The term pooled employer plan does not include—
a multiemployer plan; or
a plan established before January 1, 2016, unless the plan administrator elects that the plan will be treated as a pooled employer plan and the plan meets the requirements of this title applicable to a pooled employer plan established on or after such date.
Pooled plan provider
In general
The term pooled plan provider means a person who—
is designated by the terms of a pooled employer plan as a named fiduciary, as the plan administrator, and as the person responsible for the performance of all administrative duties (including conducting proper testing with respect to the plan and employees of each participating employer) which are reasonably necessary to ensure that—
the plan meets any requirement applicable under this Act or the Internal Revenue Code of 1986 to a plan described in section 401(a) of such Code or to a plan that consists of individual retirement accounts described in section 408 of such Code (including by reason of subsection (c) thereof), whichever is applicable; and
each participating employer takes such actions as the Secretary or pooled plan provider determines are necessary for the plan to meet the requirements described in subclause (I), including providing the disclosures and information described in paragraph (43)(B)(v)(II);
registers as a pooled plan provider with the Secretary, and provides to the Secretary such other information as the Secretary may require, before beginning operations as a pooled plan provider;
acknowledges in writing that such person is a named fiduciary, and the plan administrator, with respect to the pooled employer plan; and
is responsible for ensuring that all persons who handle assets of, or who are fiduciaries of, the pooled employer plan are bonded in accordance with section 412.
Audits, examinations and investigations
The Secretary may perform audits, examinations, and investigations of pooled plan providers as may be necessary to enforce and carry out the purposes of this paragraph and paragraph (43).
Guidance
In general
The Secretary shall issue such guidance as the Secretary determines appropriate to carry out this paragraph and paragraph (43), including guidance—
to identify the administrative duties and other actions required to be performed by a pooled plan provider under either such paragraph; and
which requires in appropriate cases that if a participating employer fails to take the actions required under subparagraph (A)(i)(II)—
the assets of the plan attributable to employees of the participating employer are transferred to a plan maintained only by the participating employer (or its successor), to an eligible retirement plan as defined in section 402(c)(8)(B) of the Internal Revenue Code of 1986 for each individual whose account is transferred, or to any other arrangement that the Secretary determines is appropriate in such guidance; and
the participating employer described in item (aa) (and not the plan with respect to which the failure occurred or any other participating employer in such plan) shall, except to the extent provided in such guidance, be liable for any liabilities with respect to such plan attributable to employees of the participating employer.
Prospective application
Any guidance issued by the Secretary under this subparagraph shall not apply to any action or failure occurring before the issuance of such guidance.
Aggregation rules
For purposes of this paragraph—
In general
In determining whether a person meets the requirements of this paragraph to be a pooled plan provider with respect to any plan, all persons who are members of the same controlled group and who perform services for the plan shall be treated as one person.
Members of common group
Persons shall be treated as members of the same controlled group if such persons are treated as a single employer under subsection (c) or (d) of section 210.
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Bonding requirements for pooled employer plans
The last sentence of section 412(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1112(a)) is amended by inserting or in the case of a pooled employer plan (as defined in section 3(43)
after section 407(d)(1))
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Conforming and technical amendments
Section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is amended—
in paragraph (16)(B)—
by striking or
at the end of clause (ii), and
by striking the period at the end and inserting , or (iv) in the case of a pooled employer plan, the pooled plan provider.
; and
by striking the second paragraph (41).
Effective date
In general
The amendments made by this section shall apply to years beginning after December 31, 2017.
Rule of construction
Nothing in the amendments made by subsection (a) shall be construed as limiting the authority of the Secretary of the Treasury or the Secretary's delegate (determined without regard to such amendment) to provide for the proper treatment of a failure to meet any requirement applicable under the Internal Revenue Code of 1986 with respect to one employer (and its employees) in a multiple employer plan.
Pooled employer and multiple employer plan reporting
Additional information
Section 103 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023) is amended—
in subsection (a)(1)(B), by striking applicable subsections (d), (e), and (f)
and inserting applicable subsections (d), (e), (f), and (g)
; and
by amending subsection (g) to read as follows:
Additional information with respect to pooled employer and multiple employer plans
An annual report under this section for a plan year shall include—
with respect to any plan to which section 210(a) applies (including a pooled employer plan), a list of participating employers and a good faith estimate of the percentage of total contributions made by such participating employers during the plan year; and
with respect to a pooled employer plan, the identifying information for the person designated under the terms of the plan as the pooled plan provider.
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Simplified annual reports
Section 104(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1024(a)) is amended by striking paragraph (2)(A) and inserting the following:
With respect to annual reports required to be filed with the Secretary under this part, the Secretary may by regulation prescribe simplified annual reports for any pension plan that—
covers fewer than 100 participants; or
is a plan described in section 210(a) that covers fewer than 1,000 participants, but only if no single participating employer has 100 or more participants covered by the plan.
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Effective date
The amendments made by this section shall apply to annual reports for plan years beginning after December 31, 2017.
Removal of 10 percent cap from automatic enrollment safe harbor after 1st plan year
In general
Clause (iii) of section 401(k)(13)(C) of the Internal Revenue Code of 1986 is amended by striking , does not exceed 10 percent, and is at least
and inserting and is
.
Conforming amendments
Subclause (I) of section 401(k)(13)(C)(iii) of the Internal Revenue Code of 1986 is amended by striking 3 percent
and inserting at least 3 percent, but not greater than 10 percent,
.
Subclause (II) of section 401(k)(13)(C)(iii) of such Code is amended by striking 4 percent
and inserting at least 4 percent
.
Subclause (III) of section 401(k)(13)(C)(iii) of such Code is amended by striking 5 percent
and inserting at least 5 percent
.
Subclause (IV) of section 401(k)(13)(C)(iii) of such Code is amended by striking 6 percent
and inserting at least 6 percent
.
Effective date
The amendments made by this section shall apply to plan years beginning after December 31, 2017.
Rules relating to election of safe harbor 401(k) status
Limitation of annual safe harbor notice to matching contribution plans
In general
Subparagraph (A) of section 401(k)(12) of the Internal Revenue Code of 1986 is amended by striking if such arrangement
and all that follows and inserting “if such arrangement—
meets the contribution requirements of subparagraph (B) and the notice requirements of subparagraph (D), or
meets the contribution requirements of subparagraph (C).
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Automatic contribution arrangements
Subparagraph (B) of section 401(k)(13) of such Code is amended by striking means
and all that follows and inserting “means a cash or deferred arrangement—
which is described in subparagraph (D)(i)(I) and meets the applicable requirements of subparagraphs (C) through (E), or
which is described in subparagraph (D)(i)(II) and meets the applicable requirements of subparagraphs (C) and (D).
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Nonelective contributions
Section 401(k)(12) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph (F) as subparagraph (G), and by inserting after subparagraph (E) the following new subparagraph:
Timing of plan amendment for employer making nonelective contributions
In general
Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (C) shall apply to the arrangement for the plan year, but only if the amendment is adopted—
at any time before the 30th day before the close of the plan year, or
at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.
Exception where plan provided for matching contributions
Clause (i) shall not apply to any plan year if the plan provided at any time during the plan year that the requirements of subparagraph (B) or paragraph (13)(D)(i)(I) applied to the plan year.
4-percent contribution requirement
Clause (i)(II) shall not apply to an arrangement unless the amount of the contributions described in subparagraph (C) which the employer is required to make under the arrangement for the plan year with respect to any employee is an amount equal to at least 4 percent of the employee's compensation.
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Automatic contribution arrangements
Section 401(k)(13) of the Internal Revenue Code of 1986 is amended by adding at the end the following:
Timing of plan amendment for employer making nonelective contributions
In general
Except as provided in clause (ii), a plan may be amended after the beginning of a plan year to provide that the requirements of subparagraph (D)(i)(II) shall apply to the arrangement for the plan year, but only if the amendment is adopted—
at any time before the 30th day before the close of the plan year, or
at any time before the last day under paragraph (8)(A) for distributing excess contributions for the plan year.
Exception where plan provided for matching contributions
Clause (i) shall not apply to any plan year if the plan provided at any time during the plan year that the requirements of subparagraph (D)(i)(I) or paragraph (12)(B) applied to the plan year.
4-percent contribution requirement
Clause (i)(II) shall not apply to an arrangement unless the amount of the contributions described in subparagraph (D)(i)(II) which the employer is required to make under the arrangement for the plan year with respect to any employee is an amount equal to at least 4 percent of the employee's compensation.
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Effective date
The amendments made by this section shall apply to plan years beginning after December 31, 2017.
Increase in credit limitation for small employer pension plan startup costs
In general
Paragraph (1) of section 45E(b) of the Internal Revenue Code of 1986 is amended to read as follows:
for the first credit year and each of the 2 taxable years immediately following the first credit year, the greater of—
$500, or
the lesser of—
$250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 414(q)) and who is eligible to participate in the eligible employer plan maintained by the eligible employer, or
$5,000, and
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Effective date
The amendment made by this section shall apply to taxable years beginning after December 31, 2017.
Small employer automatic enrollment 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:
Auto-enrollment option for retirement savings options provided by small employers
In general
For purposes of section 38, in the case of an eligible employer, the retirement auto-enrollment credit determined under this section for any taxable year is an amount equal to—
$500 for any taxable year occurring during the credit period, and
zero for any other taxable year.
Credit period
For purposes of subsection (a)—
In general
The credit period with respect to any eligible employer is the 3-taxable-year period beginning with the first taxable year for which the employer includes an eligible automatic contribution arrangement (as defined in section 414(w)(3)) in a qualified employer plan (as defined in section 4972(d)) sponsored by the employer.
Maintenance of arrangement
No taxable year with respect to an employer shall be treated as occurring within the credit period unless the arrangement described in paragraph (1) is included in the plan for such year.
Eligible employer
For purposes of this section, the term eligible employer has the meaning given such term in section 408(p)(2)(C)(i).
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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 (35), by striking the period at the end of paragraph (36) and inserting , plus
, and by adding at the end the following new paragraph:
in the case of an eligible employer (as defined in section 45S(c)), the retirement auto-enrollment credit determined under section 45S(a).
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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 inserting after the item relating to section 45R the following new item:
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Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
Secure deferral arrangements
In general
Subsection (k) of section 401 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
Alternative method for secure deferral arrangements to meet nondiscrimination requirements
In general
A secure deferral arrangement shall be treated as meeting the requirements of paragraph (3)(A)(ii).
Secure deferral arrangement
For purposes of this paragraph, the term secure deferral arrangement means any cash or deferred arrangement which meets the requirements of subparagraphs (C), (D), and (E) of paragraph (13), except as modified by this paragraph.
Qualified percentage
For purposes of this paragraph, with respect to any employee, the term qualified percentage means, in lieu of the meaning given such term in paragraph (13)(C)(iii), any percentage determined under the arrangement if such percentage is applied uniformly and is—
at least 6 percent, but not greater than 10 percent, during the period ending on the last day of the first plan year which begins after the date on which the first elective contribution described in paragraph (13)(C)(i) is made with respect to such employee,
at least 8 percent during the first plan year following the plan year described in clause (i), and
at least 10 percent during any subsequent plan year.
Matching contributions
In general
For purposes of this paragraph, an arrangement shall be treated as having met the requirements of paragraph (13)(D)(i) if and only if the employer makes matching contributions on behalf of each employee who is not a highly compensated employee in an amount equal to the sum of—
100 percent of the elective contributions of the employee to the extent that such contributions do not exceed 1 percent of compensation,
50 percent of so much of such contributions as exceed 1 percent but do not exceed 6 percent of compensation, plus
25 percent of so much of such contributions as exceed 6 percent but do not exceed 10 percent of compensation.
Application of rules for matching contributions
The rules of clause (ii) of paragraph (12)(B) and clauses (iii) and (iv) of paragraph (13)(D) shall apply for purposes of clause (i) but the rule of clause (iii) of paragraph (12)(B) shall not apply for such purposes. The rate of matching contribution for each incremental deferral must be at least as high as the rate specified in clause (i), and may be higher, so long as such rate does not increase as an employee’s rate of elective contributions increases.
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Matching contributions and employee contributions
Subsection (m) of section 401 of the Internal Revenue Code of 1986 is amended by redesignating paragraph (13) as paragraph (14) and by inserting after paragraph (12) the following new paragraph:
Alternative method for secure deferral arrangements
A defined contribution plan shall be treated as meeting the requirements of paragraph (2) with respect to matching contributions and employee contributions if the plan—
is a secure deferral arrangement (as defined in subsection (k)(14)),
meets the requirements of clauses (ii) and (iii) of paragraph (11)(B), and
provides that matching contributions on behalf of any employee may not be made with respect to an employee’s contributions or elective deferrals in excess of 10 percent of the employee’s compensation.
.
Effective date
The amendments made by this section shall apply to plan years beginning after December 31, 2017.
Credit for employers with respect to modified safe harbor requirements
In general
Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by section 7, is further amended by adding at the end the following new section:
Credit for small employers with respect to modified safe harbor requirements for automatic contribution arrangements
General rule
For purposes of section 38, in the case of a small employer, the safe harbor adoption credit determined under this section for any taxable year is the amount equal to the total of the employer's matching contributions under section 401(k)(14)(D) during the taxable year on behalf of employees who are not highly compensated employees, subject to the limitations of subsection (b).
Limitations
Limitation with respect to compensation
The credit determined under subsection (a) with respect to contributions made on behalf of an employee who is not a highly compensated employee shall not exceed 2 percent of the compensation of such employee for the taxable year.
Limitation with respect to years of participation
Credit shall be determined under subsection (a) with respect to contributions made on behalf of an employee who is not a highly compensated employee only during the first 5 years such employee participates in the qualified automatic contribution arrangement.
Definitions
In general
Any term used in this section which is also used in section 401(k)(14) shall have the same meaning as when used in such section.
Small employer
The term small employer means an eligible employer (as defined in section 408(p)(2)(C)(i)).
Denial of double benefit
No deduction shall be allowable under this title for any contribution with respect to which a credit is allowed under this section.
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Credit To be part of general business credit
Subsection (b) of section 38 of the Internal Revenue Code of 1986, as amended by section 7, is further amended—
by striking plus
at the end of paragraph (36),
by striking the period at the end of paragraph (37) and inserting , plus
, and
by adding at the end the following new paragraph:
the safe harbor adoption credit determined under section 45T.
.
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, as amended by section 7, is further amended by adding after the item relating to section 45S the following new item:
.
Effective date
The amendments made by this section shall apply to taxable years that include any portion of a plan year beginning after December 31, 2017.
Modification of regulations
The Secretary of the Treasury shall promulgate regulations or other guidance that—
simplify and clarify the rules regarding the timing of participant notices required under section 401(k)(13)(E) of the Internal Revenue Code of 1986, with specific application to—
plans that allow employees to be eligible for participation immediately upon beginning employment, and
employers with multiple payroll and administrative systems, and
simplify and clarify the automatic escalation rules under sections 401(k)(13)(C)(iii) and 401(k)(14)(C) of the Internal Revenue Code of 1986 in the context of employers with multiple payroll and administrative systems.
Opportunity to claim the saver's credit on Form 1040EZ
The Secretary of the Treasury shall modify the forms for the return of tax of individuals in order to allow individuals claiming the credit under section 25B of the Internal Revenue Code of 1986 to file (and claim such credit on) Form 1040EZ.