HF 2665

as introduced - 90th Legislature (2017 - 2018) Posted on 05/15/2017 10:30am

A bill for an act
relating to retirement; establishing the Minnesota secure choice retirement program;
proposing coding for new law as Minnesota Statutes, chapter 187.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [187.01] MINNESOTA SECURE CHOICE RETIREMENT PROGRAM;
CITATION.
new text end

new text begin This chapter shall be known as and may be cited as the "Minnesota Secure Choice
Retirement Program Act."
new text end

Sec. 2.

new text begin [187.03] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability. new text end

new text begin For purposes of this chapter, the terms defined in this
section have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Board. new text end

new text begin "Board" means the secure choice retirement program board of directors.
new text end

new text begin Subd. 3. new text end

new text begin Eligible employee. new text end

new text begin "Eligible employee" means an individual employed by an
eligible employer, with a primary work site in the state, and who, for the immediately
preceding calendar year, worked 500 or more hours for the eligible employer. Once an
individual has worked 500 or more hours for the eligible employer in a calendar year, the
individual continues to be an eligible employee even if the individual works fewer than 500
hours in the current or any future calendar year. Eligible employee does not include an
individual who, on December 31 of the preceding calendar year, was less than 18 years of
age.
new text end

new text begin Subd. 4. new text end

new text begin Eligible employer. new text end

new text begin (a) "Eligible employer" means a person or entity:
new text end

new text begin (1) engaged in a business, industry, profession, trade, or other enterprise, whether for
profit or not for profit;
new text end

new text begin (2) with one or more employees in the state; and
new text end

new text begin (3) that does not sponsor or contribute to, on behalf of all its employees, a retirement
savings plan.
new text end

new text begin (b) Eligible employer does not include an employer that has not engaged in a business,
industry, profession, trade, or other enterprise, whether for profit or not for profit at any
time during the immediately preceding calendar year. Eligible employer does not include
the state or its subdivisions.
new text end

new text begin Subd. 5. new text end

new text begin ERISA. new text end

new text begin "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, United States Code, title 29, section 1001, et seq.
new text end

new text begin Subd. 6. new text end

new text begin Executive director. new text end

new text begin "Executive director" means the chief executive and
administrative head of the program.
new text end

new text begin Subd. 7. new text end

new text begin Internal Revenue Code. new text end

new text begin "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, United States Code, title 26, section 1, et seq.
new text end

new text begin Subd. 8. new text end

new text begin Participating employee. new text end

new text begin "Participating employee" means an eligible employee
who is contributing to the secure choice retirement program.
new text end

new text begin Subd. 9. new text end

new text begin Participating employer. new text end

new text begin "Participating employer" means an eligible employer
that participates in a payroll deposit retirement savings arrangement for eligible employees
as provided for in this chapter.
new text end

new text begin Subd. 10. new text end

new text begin Payroll deposit retirement savings arrangement. new text end

new text begin "Payroll deposit retirement
savings arrangement" means an arrangement in which an employer makes contributions on
behalf of participating employees by deducting a specified portion of the employee's pay
and transmitting the deducted amount to the secure choice retirement program at the same
time and manner as payroll deductions for federal and state tax withholding.
new text end

new text begin Subd. 11. new text end

new text begin Program. new text end

new text begin "Program" means the secure choice retirement program under this
chapter.
new text end

new text begin Subd. 12. new text end

new text begin Retirement savings plan. new text end

new text begin "Retirement savings plan" means a plan that permits
contributions to be set aside for retirement and provides for the deferral of income tax on
the contributions, unless the employee elects to contribute after-tax amounts. Retirement
savings plan includes but is not limited to any plan that satisfies the applicable requirements
of section 401(a) of the Internal Revenue Code, a plan listed in section 219(g)(5) of the
Internal Revenue Code, a plan within the meaning of section 457(b) of the Internal Revenue
Code, a simplified employee pension (SEP) plan, a savings incentive match plan for
employees (SIMPLE) plan, an automatic enrollment payroll deduction individual retirement
account, and a multiemployer pension plan described in section 414(f) of the Internal
Revenue Code.
new text end

new text begin Subd. 13. new text end

new text begin Secure choice individual retirement account plan or IRAP. new text end

new text begin "Secure choice
individual retirement account plan" or "IRAP" means the plan established under section
187.05.
new text end

new text begin Subd. 14. new text end

new text begin Secure choice retirement savings trust. new text end

new text begin "Secure choice retirement savings
trust" means a trust established to hold contributions and investment earnings on funds
contributed under the IRAP.
new text end

Sec. 3.

new text begin [187.05] SECURE CHOICE INDIVIDUAL RETIREMENT ACCOUNT
PLAN.
new text end

new text begin Subdivision 1. new text end

new text begin IRAP established. new text end

new text begin The board must design, establish, and maintain a
payroll deduction arrangement whereby employee payroll deduction contributions are
transmitted by the employee's eligible employer to an individual retirement account
established for the employee. The board must establish procedures for opening an individual
retirement account for each employee whose eligible employer transmits employee payroll
deduction contributions under the IRAP.
new text end

new text begin Subd. 2. new text end

new text begin Compliance with Internal Revenue Code. new text end

new text begin Each individual retirement account
opened under the IRAP must be established and administered in compliance with section
408(a) of the Internal Revenue Code for the benefit of the employee for whom the account
was opened.
new text end

new text begin Subd. 3. new text end

new text begin Contributions held in custodial account or trust. new text end

new text begin Employee payroll deduction
contributions shall be transmitted by the employer to an account established for the benefit
of the employee that is a custodial account or, if a trust is established to hold contributions
under the IRAP, under the trust in the manner and according to the schedule specified and
established by the board.
new text end

new text begin Subd. 4. new text end

new text begin Contribution rate. new text end

new text begin The board shall establish default, minimum, and maximum
contribution levels as well as autoescalation requirements whereby employees' contributions
automatically escalate from year to year until they reach a maximum contribution rate,
subject to the employee's election to change the contribution rate or cease contributions.
new text end

new text begin Subd. 5. new text end

new text begin Vesting. new text end

new text begin Employees shall at all times be 100 percent vested in their accounts.
new text end

new text begin Subd. 6. new text end

new text begin Distributions. new text end

new text begin The board shall establish alternatives for taking a distribution
of an account following termination of employment, including the option to elect a direct
rollover within the meaning of section 402(c) of the Internal Revenue Code. Distribution
alternatives shall include the option to transfer all or any portion of the account toward the
purchase of an annuity.
new text end

Sec. 4.

new text begin [187.06] ESTABLISHMENT OF TRUST OR CUSTODIAL ACCOUNTS;
INVESTMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Trust or custodial accounts established. new text end

new text begin The board must establish and
maintain either custodial accounts or a trust for the IRAP to hold and invest contributions
under the IRAP.
new text end

new text begin Subd. 2. new text end

new text begin Individual accounts established. new text end

new text begin The trustee or custodian, as applicable, must
maintain accounts for employer and employee contributions for each employee contributing
under the IRAP. Interest, earnings, and losses shall be allocated to accounts as prescribed
by the board. An individual's retirement savings benefit under the program shall be an
amount equal to the balance in the individual's program account on the date the retirement
savings benefit becomes payable.
new text end

new text begin Subd. 3. new text end

new text begin Investments. new text end

new text begin Each employee or former employee is entitled to direct the
investment of the contributions credited to the employee's account in the trust or custodial
account, as applicable. The board shall make available for investment a diversified array
of investment funds selected by the State Board of Investment under section 356.645 and
shall otherwise comply with the requirements of section 404(c) of ERISA and related
regulations. Members of the board, the executive director of the State Board of Investment,
and all other fiduciaries are relieved of fiduciary responsibility for investment losses resulting
from the employee's investment directions.
new text end

new text begin Subd. 4. new text end

new text begin Default investment fund. new text end

new text begin The board shall designate a default investment fund
that satisfies the requirements of section 404(c)(5) of ERISA and related regulations.
Accounts for which no investment direction has been given by the employee or former
employee shall be invested in the default investment fund. Members of the board, the
executive director of the State Board of Investment, and all other fiduciaries are relieved
of fiduciary duty under section 404 of ERISA and section 356A.06, subdivision 10, with
regard to investment of assets in the default investment fund.
new text end

new text begin Subd. 5. new text end

new text begin Inalienability of accounts. new text end

new text begin No account under the program is subject to
assignment or alienation, either voluntarily or involuntarily, or to the claims of creditors.
new text end

Sec. 5.

new text begin [187.07] RESPONSIBILITIES OF ELIGIBLE EMPLOYERS.
new text end

new text begin Subdivision 1. new text end

new text begin Enrollment in IRAP. new text end

new text begin An eligible employer must enroll eligible
employees, who do not otherwise have the option of enrolling in an employer-sponsored
retirement savings plan, in the secure choice individual retirement account plan.
new text end

new text begin Subd. 2. new text end

new text begin Remitting contributions. new text end

new text begin A participating employer must timely remit
contributions, as required by the board. The board may establish penalties for employers
for failing to timely remit contributions.
new text end

new text begin Subd. 3. new text end

new text begin Distribution of plan information. new text end

new text begin Participating employers shall provide
information packets regarding the IRAP, prepared by the board, to all eligible employees.
For employees contributing to the IRAP, the information must be provided to an employee
no later than 30 days before the date of the first payroll from which employee contributions
are deducted for transmittal to the IRAP.
new text end

new text begin Subd. 4. new text end

new text begin No fiduciary responsibility. new text end

new text begin Except for the responsibilities described in
subdivisions 1 to 3, a participating employer has no obligations to employees and is not a
fiduciary or considered to be a fiduciary regarding the secure choice retirement savings trust
or the program. Participating employers do not bear responsibility for the administration,
investment performance, plan design, or benefits paid to plan participants.
new text end

new text begin Subd. 5. new text end

new text begin Employer liability. new text end

new text begin An employer is not liable to an employee or former
employee for alleged damages resulting from an employee's participation in or failure to
participate in the program.
new text end

new text begin Subd. 6. new text end

new text begin Enforcement. new text end

new text begin The board may enforce the provisions of this chapter. The board
may impose penalties, not to exceed $1,000 per month of noncompliance, against any
eligible employer that fails to comply with this section. Proceeds of such penalties must be
deposited in a special revenue account and are appropriated to the program.
new text end

Sec. 6.

new text begin [187.08] SECURE CHOICE RETIREMENT SAVINGS BOARD OF
DIRECTORS.
new text end

new text begin Subdivision 1. new text end

new text begin Membership. new text end

new text begin (a) The program is governed by a board of directors
consisting of the following seven members:
new text end

new text begin (1) the executive director of the Minnesota State Retirement System;
new text end

new text begin (2) the executive director of the State Board of Investment or the executive director's
designee;
new text end

new text begin (3) an executive or operations manager with at least ten years' experience in Internal
Revenue Code section 401(k) plan record keeping;
new text end

new text begin (4) an executive or operations manager with at least ten years' experience in individual
retirement accounts;
new text end

new text begin (5) an executive or other professional with at least ten years' experience in retirement
plan investments;
new text end

new text begin (6) a human resources or retirement benefits executive from a Fortune 500 corporation,
with at least ten years' experience in administering the corporation's 401(k) plan; and
new text end

new text begin (7) a small business owner or executive.
new text end

new text begin (b) The governor must appoint members under paragraph (a), clauses (3) to (7), as
provided in section 15.0597.
new text end

new text begin (c) For the members under paragraph (a), clauses (3) to (5), the Legislative Commission
on Pensions and Retirement must provide the governor with recommendations for
appointments.
new text end

new text begin Subd. 2. new text end

new text begin Terms of initial appointees and deadline for first appointments. new text end

new text begin (a) The
terms of initial appointees are as follows:
new text end

new text begin (1) the executive directors of the Minnesota State Retirement System and the State Board
of Investment shall serve indefinitely;
new text end

new text begin (2) the members appointed under subdivision 1, paragraph (a), clauses (3) to (5), shall
initially serve three, four, and five years, respectively, and four-year terms thereafter; and
new text end

new text begin (3) the members appointed under subdivision 1, paragraph (a), clauses (6) and (7), shall
serve four-year terms.
new text end

new text begin (b) The governor must make initial appointments to the board by January 15, 2018.
new text end

new text begin Subd. 3. new text end

new text begin Removal; vacancies. new text end

new text begin Public members may be removed and vacancies filled
as provided under section 15.0575, subdivisions 4 and 5.
new text end

new text begin Subd. 4. new text end

new text begin Compensation. new text end

new text begin Public members shall be compensated and expenses reimbursed
as provided under section 15.0575, subdivision 3.
new text end

new text begin Subd. 5. new text end

new text begin Chair. new text end

new text begin The governor must appoint one of the members of the board of directors
as its chair.
new text end

new text begin Subd. 6. new text end

new text begin Duties. new text end

new text begin In addition to the other duties set forth in this chapter, the board has
the following duties:
new text end

new text begin (1) appoint an executive director, determine the duties of the executive director, and set
the compensation of the executive director;
new text end

new text begin (2) establish secure processes for enrolling employees in the IRAP and for transmitting
employee and employer contributions to custodial accounts or accounts within a trust;
new text end

new text begin (3) prepare a budget and establish procedures for the payment of costs of administering
and operating the program;
new text end

new text begin (4) lease or otherwise procure office space and equipment necessary to operate the
program;
new text end

new text begin (5) procure insurance in connection with the property of the program and the activities
of the board, executive director, and other staff;
new text end

new text begin (6) accept contributions from employees and from participating employers for the benefit
of their employees in cash or cash equivalents only;
new text end

new text begin (7) keep annual administrative expenses as low as possible, but in no event may they
exceed one percent of the total trust balance, and allocate administrative expenses to each
employee's account on a pro rata basis, or such other basis as the board determines to be
equitable;
new text end

new text begin (8) determine the eligibility of an employer, employee, or other individual to participate
in the program, interpret the program's governing documents and this chapter, and make
all other decisions necessary to administer the program;
new text end

new text begin (9) prepare employee information that provides notice to employees regarding the
following:
new text end

new text begin (i) the benefits and risks associated with participating in the IRAP, as applicable;
new text end

new text begin (ii) enrolling in the IRAP;
new text end

new text begin (iii) how to opt out of the IRAP;
new text end

new text begin (iv) applying for distribution of retirement benefits;
new text end

new text begin (v) how to obtain additional information on the IRAP;
new text end

new text begin (vi) lack of employer liability for decisions employees make; and
new text end

new text begin (vii) that benefits and investment returns are not guaranteed by the state and the state
has no liability for investment performance;
new text end

new text begin (10) publish an annual audited financial report, prepared according to generally accepted
accounting principles, on the operations of the program, performed by an independent
certified public accountant, which must include but need not be limited to direct and indirect
costs attributable to the use of outside consultants, independent contractors, and other persons
who are not state employees. The board must provide the report to the chairs and ranking
minority members of the legislative committees with jurisdiction over jobs and economic
development and state government finance, the executive director of the State Board of
Investment, the chair of the Legislative Commission on Pensions and Retirement, and the
Legislative Reference Library;
new text end

new text begin (11) publish an annual report regarding plan outcomes, progress toward savings goals
established by the board, statistics on eligible employees and participating employers, plan
expenses, estimated impact of the program on social safety net programs, and penalties and
violations. The board must provide the report to the chairs and ranking minority members
of the legislative committees with jurisdiction over jobs and economic development and
state government finance, the executive director of the State Board of Investment, the chair
of the Legislative Commission on Pensions and Retirement, and the Legislative Reference
Library;
new text end

new text begin (12) adopt rules to implement the program; and
new text end

new text begin (13) properly file any reports required by federal law.
new text end

new text begin Subd. 7. new text end

new text begin Conflict of interest; economic interest statement. new text end

new text begin No member of the board
may participate in deliberations or vote on any matter before the board that will or is likely
to result in direct, measurable economic gain to the member or the member's employee.
Members of the board shall file with the Campaign Finance and Public Disclosure Board
an economic interest statement in a manner as prescribed by section 10A.09, subdivisions
5 and 6.
new text end

new text begin Subd. 8. new text end

new text begin Liability; indemnification. new text end

new text begin A member of the board is an employee of the state
for the purposes of sections 3.732 to 3.7365.
new text end

new text begin Subd. 9. new text end

new text begin Data practices; open meetings. new text end

new text begin The board is subject to chapters 13 and 13D.
new text end

Sec. 7.

new text begin [187.09] FIDUCIARY DUTY; STANDARD OF CARE.
new text end

new text begin The members of the board, the State Board of Investment, and the staff of the program
are governed by chapter 356A, to the extent any of them exercise fiduciary duty.
new text end

Sec. 8.

new text begin [187.10] NO STATE LIABILITY.
new text end

new text begin The state has no liability for the payment of, the amount of, or losses to any benefit to
any participant in the program.
new text end

Sec. 9. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 2 and 4 to 8 are effective the day following final enactment. Section 3 is
effective the day after the secure choice retirement program board of directors opens the
secure choice retirement savings program for enrollment or August 1, 2018, whichever is
earlier.
new text end