Mandatory Retirement Savings Kicks Off in 2028: Most Employers Must Auto-Enroll Workers or Face $10/Day Tax

The Automatic IRA Act of 2025 is the legislative equivalent of your mom forcing you to put money in a savings account—it’s probably good for you, but it’s mandatory. Starting in 2028, this bill requires nearly every employer to automatically enroll their workers into a retirement plan, which could be a 401(k), a 403(b), or a new type of automatic IRA arrangement (Section 2). The goal is simple: get everyone saving for retirement, whether they think about it or not. If your employer doesn't offer a plan, they’ll have to facilitate one, and the default contribution starts at 6% of your pay, escalating annually until it hits 10% (Section 2).

The Auto-Pilot Savings Program

For most employees, this means a chunk of their paycheck will automatically go into a retirement account unless they actively opt out. This is a game-changer, especially for those who have never had access to a workplace plan. Under the new automatic IRA rules, your contributions are defaulted into a Roth IRA, meaning you pay taxes now and withdraw tax-free later, which is a big deal for younger workers expecting to be in a higher tax bracket down the road (Section 2). If you’re a busy professional or a trade worker who has always meant to start saving but never got around to the paperwork, this bill handles the heavy lifting for you. You can still change your contribution level or opt out entirely, but the default setting is now save first.

The Employer Mandate and the Compliance Clock

This isn't just a nudge; it’s a mandate backed by a serious financial threat. Employers who fail to maintain or facilitate one of these automatic contribution plans face a new excise tax of $10 per day, per employee (Section 4980J). Think about that: a mid-sized company with 50 employees could rack up $500 a day in penalties if they drag their feet. While there are exceptions—like for employers with fewer than 10 employees or those in business for less than two years—the vast majority of businesses are now on the hook (Section 4980J).

For small business owners, the bill offers a carrot along with the stick. If you have 100 or fewer employees and start a new automatic IRA arrangement, you can claim a $500 tax credit for each of the first three years (Section 3). This credit is designed to offset the initial administrative hassle of setting up the plan. However, employers who miss the small-employer cutoff but still don't offer a plan are left with only the stick, facing the full compliance burden without the tax break.

Who Manages the Money, and What About State Plans?

One detail that matters for the average saver is investment choice. If you don't pick an investment, your funds go into a default option. For automatic IRAs, the employer must offer you at least three options: a target date fund, a principal preservation fund (think stability), and a balanced fund (Section 2). Crucially, the bill requires that the fees and expenses charged to participants in these non-ERISA plans cannot be “unreasonable” (Section 2). Since the bill doesn't define “unreasonable,” regulators will have to figure that out, and that's where the cost of saving could get messy for the average worker.

Finally, the bill steps on the toes of state-level savings programs. Section 4 establishes federal preemption, meaning if a state tries to pass a law that prohibits or restricts these federal automatic IRA arrangements, the federal rule wins out. This creates a standardized national framework, but it also means states can't easily create more consumer-friendly or robust retirement programs than what the federal government dictates, unless their state law was already in place before January 1, 2028 (Section 4).