On December 15, Representative Richard Neal (D-MA), Ranking Member of the House Ways & Means Committee, introduced the Automatic IRA Act of 2025 (H.R. 6722, the “Auto IRA Act”). The legislation is intended to address concerns that many working people lack access to an employer-provided retirement plan. Congressman Neal first introduced similar legislation twenty years ago during the 109th Congress, and he has remained committed to advancing the legislation through the Ways & Means Committee.
The Auto IRA Act would require most employers to automatically enroll their employees in a qualifying retirement plan or program. Employers with 10 or fewer employees, governments, and churches would be exempt from the requirement. Employers would have the option of offering a qualified retirement plan (e.g., a 401(k) or pension) or enrolling employees in a payroll deduction IRA with specific features, referred to as an “automatic IRA arrangement.” Notably, the bill provides a new tax credit to offset implementation costs for certain small employers ($500 for three years), and it would require 401(k) plans with over 100 participants to offer a lifetime income distribution option.
The Auto IRA Act provides that a payroll deduction IRA qualifies as an automatic IRA arrangement if it meets several conditions. Employees must be automatically enrolled at a default contribution rate of 6% of compensation, and the contribution rate is required to automatically escalate by 1% per year up to 10%, though participants can opt out or elect a different contribution rate. The automatic IRA arrangement can be pre-tax (traditional) or post-tax (Roth), but it must offer a target date fund as the default investment and include both principal preservation and balanced fund investment options. The legislation directs the Secretary of the Treasury to provide guidance to accommodate gig workers and other self-employed individuals.
A number of states have already implemented their own version of the Auto IRA Act, and the state programs currently hold approximately $2.7 billion of savings in state-facilitated IRAs. Representative Neal’s legislation would permit state programs existing prior to January 1, 2028, to continue as they are. However, the bill would broadly preempt state laws passed after January 1, 2028, meaning states could not pass laws covering employers exempt from the Auto IRA Act.