Automatic IRA Act of 2025

Summary

Establishes a federal framework for “automatic contribution” retirement arrangements (including automatic IRAs, certain defined contribution plans, and some payroll-based arrangements), sets basic notice, eligibility, contribution, fee, investment, and lifetime-income rules for those arrangements, and preempts State laws that would restrict them. Creates a new small-employer tax credit of up to $500 per year for eligible employers that start an automatic IRA arrangement, available for a three-calendar-year credit period, with the credit effective for taxable years beginning after December 31, 2025.

• Establishes a federal definition and standards for "automatic contribution" retirement arrangements, covering automatic IRAs and certain payroll-based plans.
• Requires notice, eligibility, contribution, fee, investment, and lifetime-income rules for plans to qualify as automatic contribution arrangements.
• Creates a new small-employer automatic IRA tax credit of up to $500 per year for each eligible employer during a three-year credit period.
• The tax credit is added to the general business credit and is effective for taxable years beginning after Dec 31, 2025.
• Preempts State laws that would prohibit or restrict automatic IRA arrangements, while preserving qualified State-run payroll programs as an exception.
• Preserves certain existing employer-established plans that already offered annuities or custodial accounts as of enactment.
• Applies coordination and administrative rules similar to existing retirement-plan provisions (e.g., 401(k) automatic-enrollment notice rules).
• Creates new IRS implementation work (rulemaking/guidance) and operational impacts for payroll processors, financial institutions, and plan sponsors.