Failure to provide covered retirement program

(a) In general Chapter 43 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 4980J. Failure to maintain required retirement program (a) General rule (1) Employers There is hereby imposed a tax on the failure of an employer either— (A) to make available a covered retirement program to all employees of the employer, or (B) in the case of a covered employer, to make required contributions under sections 8423(a) and 8432(c) of title 5, United States Code with respect to the employees of the employer. (2) Self-employed individuals There is hereby imposed a tax on the failure of a self-employed individual either— (A) to participate in a covered retirement program, or (B) in the case of a covered self-employed individual, to make required contributions under sections 8423(a) and 8432(c) of title 5, United States Code with respect to the individual. (b) Amount of tax (1) In general The amount of the tax imposed by subsection (a) on any failure with respect to an employee or self-employed individual shall be $10 for each day in the noncompliance period with respect to such failure. (2) Noncompliance period For purposes of this section, the term noncompliance period means, with respect to any failure, the period— (A) beginning on the date such failure first occurs, and (B) ending on the earlier of— (i) the date such failure is corrected, or (ii) with respect to any employer, the date that is 3 months after the last date on which the employee is employed by the employer. (3) Adjustment for inflation (A) In general In the case of any failure occurring in a calendar year beginning after 2026, the $10 amount under paragraph (1) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year determined by substituting calendar year 2025 for calendar year 2016 in subparagraph (A)(ii) thereof. (B) Rounding If any amount adjusted under subparagraph (A) is not a whole dollar amount, such amount shall be rounded to the nearest whole dollar amount. (c) Limitations on amount of tax (1) Tax not to apply where failure not discovered exercising reasonable diligence No tax shall be imposed by subsection (a) on any failure during any period for which it is established to the satisfaction of the Secretary that none of the persons referred to in subsection (d) knew, nor exercising reasonable diligence would have known, that such failure existed. (2) Overall limitation for unintentional failures In the case of failures which are due to reasonable cause and not to willful neglect— (A) General rule The tax imposed by subsection (a) for failures during the taxable year of the employer or self-employed individual shall not exceed $500,000. (B) Taxable years in the case of certain controlled groups For purposes of this subparagraph, if not all persons who are treated as a single employer for purposes of this section have the same taxable year, the taxable years taken into account shall be determined under principles similar to the principles of section 1561. (3) Waiver by Secretary In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that the payment of such tax would be excessive relative to the failure involved. (d) Employer liability for tax The employer shall be liable for the tax imposed by subsection (a)(1) on a failure. All employers, determined without regard to subsection (e)(2), shall be jointly and severally liable for the liability of any other employer with which they are aggregated under subsection (e)(2). (e) Definitions For purposes of this section— (1) Terms relating to covered retirement programs, etc Any term used in this section which is defined in section 2 of the Pensions for All Act has the meaning given such term by such section. (2) Employer All employers treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.. (b) Clerical amendment The table of sections for chapter 43 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 4980J. Failure to maintain required retirement program.. (c) Effective date The amendments made by this section shall apply to plan years beginning after December 31, 2025.