SF 2078

as introduced - 88th Legislature (2013 - 2014) Posted on 03/25/2014 04:15pm

A bill for an act
relating to retirement; creating the Minnesota secure choice retirement savings
plan; requiring a report; establishing a trust account; proposing coding for new
law as Minnesota Statutes, chapter 352G.

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

Section 1.

new text begin [352G.01] 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 sections 352G.01 to 352G.08, the
terms defined in this section shall have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin 401(a). new text end

new text begin (a) "401(a) account" means an account associated with an
individual plan participant within a 401(a) trust.
new text end

new text begin (b) "401(a) trust" means a trust fund that is created to receive employer profit-sharing
contributions to individual accounts of employees under section 401(a) of the Code.
new text end

new text begin Subd. 3. new text end

new text begin Board. new text end

new text begin "Board" means the Minnesota Secure Choice Retirement Savings
Board.
new text end

new text begin Subd. 4. new text end

new text begin Code. new text end

new text begin "Code" means the Internal Revenue Code of 1986, as amended
through April 14, 2011.
new text end

new text begin Subd. 5. new text end

new text begin Eligible employee. new text end

new text begin "Eligible employee" means: (1) a person, other than
an excluded employee, who is employed by an eligible employer; or (2) a self-employed
person.
new text end

new text begin Subd. 6. new text end

new text begin Eligible employer. new text end

new text begin "Eligible employer" means a person or entity with one
or more employees in Minnesota, excluding the federal government.
new text end

new text begin Subd. 7. new text end

new text begin Excluded employee. new text end

new text begin (a) "Excluded employee" means:
new text end

new text begin (1) any employee who is eligible to participate in either a qualifying retirement plan
or arrangement described in section 219(g)(5) of the Code, or an automatic enrollment
payroll deduction IRA maintained or offered by the employee's employer;
new text end

new text begin (2) any employee who was eligible at any time during the preceding two calendar
years to participate in a qualifying retirement plan or arrangement described in section
219(g)(5) of the Code that was terminated or frozen by the employee's employer;
new text end

new text begin (3) any employee who was eligible at any time during the preceding two calendar
years to participate in an automatic enrollment payroll deduction IRA maintained or
offered by the employee's employer that the employer ceased to offer;
new text end

new text begin (4) any employee covered by a collective bargaining agreement that expressly
provides for the employer to contribute to a multiemployer retirement plan described in
section 414(f) of the Code;
new text end

new text begin (5) any employee who is an active member of a public employee retirement plan
listed in section 356.20, subdivision 2; and
new text end

new text begin (6) any employee who has not attained the age of 18 before the beginning of the
calendar year.
new text end

new text begin (b) A person who is an excluded employee with respect to employment by one
employer is excluded only with respect to that employer, and is not an excluded employee
with respect to another employer, or with respect to self-employment, if paragraph (a)
does not apply to that employment. A person who becomes an excluded employee is
excluded only for purposes of future contributions, and this exclusion does not affect the
person's account with respect to prior contributions.
new text end

new text begin Subd. 8. new text end

new text begin IRA. new text end

new text begin "IRA" means an individual retirement account or individual
retirement annuity under sections 408(a) or 408(b) of the Code.
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 provides a payroll deposit retirement savings arrangement under this
chapter for eligible employees.
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 by which an employer allows
employees to remit payroll deduction contributions to the plan.
new text end

new text begin Subd. 11. new text end

new text begin Plan. new text end

new text begin "Plan" means the Minnesota secure choice retirement savings plan
established in section 352G.02.
new text end

new text begin Subd. 12. new text end

new text begin Plan administrator. new text end

new text begin "Plan administrator" means the person selected by
the board to administer the daily operations of the plan and to provide record keeping
and other services for the plan.
new text end

new text begin Subd. 13. new text end

new text begin Trust. new text end

new text begin "Trust" means the Minnesota Secure Choice Retirement Savings
Trust.
new text end

Sec. 2.

new text begin [352G.02] MINNESOTA SECURE CHOICE RETIREMENT SAVINGS
PLAN.
new text end

new text begin Subdivision 1. new text end

new text begin Plan established. new text end

new text begin There is hereby established a retirement savings
plan known as the Minnesota secure choice retirement savings plan that shall meet all of
the requirements to qualify for the favorable federal income tax treatment ordinarily
accorded to IRAs under the Code, and that must not be determined to be an employee
benefit plan under the federal Employee Retirement Income Security Act.
new text end

new text begin Subd. 2. new text end

new text begin Purpose. new text end

new text begin The plan is established for the purposes of:
new text end

new text begin (1) promoting greater retirement income for private employees;
new text end

new text begin (2) maximizing participation by private employees who have no access to retirement
savings through their place of employment by minimizing barriers to participation;
new text end

new text begin (3) minimizing fees;
new text end

new text begin (4) portability across private employers; and
new text end

new text begin (5) providing for stable income through retirement, while incurring no state liability
for payment of benefits.
new text end

Sec. 3.

new text begin [352G.03] MINNESOTA SECURE CHOICE RETIREMENT SAVINGS
TRUST.
new text end

new text begin Subdivision 1. new text end

new text begin Trust established. new text end

new text begin (a) All assets of the plan, including contributions
paid by employees and employers and investment earnings, shall be held in trust for the
exclusive purposes of paying benefits to the participants of the plan, paying for the cost of
administration of the plan, and making investments for the benefit of the plan participants.
new text end

new text begin (b) Assets of the plan shall be held in a separate account in the state treasury known
as the Minnesota Secure Choice Retirement Savings Trust to be invested by the State
Board of Investment consistent with applicable rules, or may be invested by third-party
investment management under contract with the State Board of Investment.
new text end

new text begin (c) Plan participants may not direct the investment of contributions to the plan or
plan earnings.
new text end

new text begin (d) Plan assets are not subject to claims by creditors of the state, are not part of the
general fund, and are not subject to appropriations by the state.
new text end

new text begin Subd. 2. new text end

new text begin Investment by the State Board of Investment. new text end

new text begin (a) The State Board of
Investment shall establish the plan's investment requirements.
new text end

new text begin (b) The State Board of Investment shall invest the money in the trust with care, skill,
prudence, and diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with those matters would use in the conduct of
an enterprise of a like character and with like aims, subject to the provision of section
11A.24, except that the accounts may be invested without limit in investment options from
open-ended investment companies registered under the federal Investment Company Act
of 1940, United States Code, title 15, sections 80a-1 to 80a-64.
new text end

new text begin (c) The State Board of Investment may arrange for collective, common, and pooled
investment of assets of the retirement savings program or arrangements, including
investments in conjunction with other funds with which those assets are permitted to be
collectively invested, with a view to saving costs through efficiencies and economies
of scale.
new text end

new text begin (d) The State Board of Investment may contract with one or more third parties,
pursuant to subdivision 1, paragraph (b), for investment management or related services
in connection with investing the money in the trust, subject to the responsibilities in
subdivision 2, paragraphs (b) and (c). The State Board of Investment and the board may
jointly contract with third-party providers, if the board and the State Board of Investment
jointly determine that it is desirable to contract with the same entity or entities for
administration, record keeping, and investment management services.
new text end

new text begin Subd. 3. new text end

new text begin Fees. new text end

new text begin The board and the State Board of Investment may establish an
annual fee, equal to a percentage of the average daily net assets of the plan, to be imposed
on participants to recover the costs of administration, record keeping, and investment
management. The board and the State Board of Investment must use best efforts to keep
these fees as low as possible, consistent with efficient administration and high-quality
investment management, so that the returns on savings invested in the plan will be as
high as possible.
new text end

new text begin Subd. 4. new text end

new text begin Risk management. new text end

new text begin The State Board of Investment shall adopt a written
statement of investment policy that includes a risk management and oversight program.
The investment policy shall mitigate risk by maintaining a diversified investment portfolio.
new text end

new text begin Subd. 5. new text end

new text begin Benefits. new text end

new text begin Interest, earnings, and losses shall be allocated to plan 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 plan account on the date the
retirement savings benefit becomes payable.
new text end

new text begin Subd. 6. new text end

new text begin State liability limited. new text end

new text begin The state shall have no liability for the payment of
any benefit to any participant in the program.
new text end

Sec. 4.

new text begin [352G.04] OPTIONAL EMPLOYER CONTRIBUTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Employer contributions. new text end

new text begin The board shall evaluate, and to the extent
allowed under the federal Employee Retirement Income Security Act and the Code, shall
establish a separate 401(a) trust fund to accept profit-sharing contributions from employers
to individual accounts of their employees, meeting the following conditions:
new text end

new text begin (1) employer contributions must be in cash or cash equivalents only; securities must
not be accepted as contributions;
new text end

new text begin (2) 401(a) accounts must be segregated from the trust;
new text end

new text begin (3) the board must act as a fiduciary under the federal Employee Retirement Income
Security Act with respect to the 401(a) accounts, and may, to the extent permitted by
federal law, direct their investment in the same manner, with the same managers and
asset allocations as the assets of the trust;
new text end

new text begin (4) employer participation in the 401(a) profit-sharing trust fund is strictly voluntary;
new text end

new text begin (5) the investments in the 401(a) accounts, comprised of employer contributions plus
credited earnings, may mirror the investments in the individuals' plan accounts, comprised
of employee contributions plus credited earnings, to the extent permitted by federal law; and
new text end

new text begin (6) 401(a) accounts must provide for immediate vesting.
new text end

new text begin Subd. 2. new text end

new text begin Rollover. new text end

new text begin Upon the occurrence of a condition permitting a distribution
of benefits under the Code, the plan participant, or beneficiary, may elect to roll over the
account balance in his or her 401(a) account into his or her plan account for the purpose of
obtaining secure retirement income or annuitization, to the extent permitted by law.
new text end

Sec. 5.

new text begin [352G.05] MINNESOTA SECURE CHOICE RETIREMENT SAVINGS
BOARD.
new text end

new text begin Subdivision 1. new text end

new text begin Minnesota Secure Choice Retirement Savings Board established.
new text end

new text begin There is established the Minnesota Secure Choice Retirement Savings Board to administer
the Minnesota secure choice retirement savings plan.
new text end

new text begin Subd. 2. new text end

new text begin Membership. new text end

new text begin (a) The board shall have nine members, and shall be
comprised of the commissioner of management and budget or a designee, who shall serve
as both treasurer and chair, and the following members:
new text end

new text begin (1) four members appointed by the governor;
new text end

new text begin (2) two members appointed by the speaker of the house who are not members of
the legislature; and
new text end

new text begin (3) two members appointed by the majority leader of the senate who are not
members of the legislature.
new text end

new text begin (b) Of the four members appointed under paragraph (a), clause (1):
new text end

new text begin (1) one must have retirement savings or investment expertise;
new text end

new text begin (2) one must represent an eligible employer with between five and 50 eligible
employees; and
new text end

new text begin (3) one must be an eligible employee.
new text end

new text begin Subd. 3. new text end

new text begin Appointments; membership terms; compensation; removal. new text end

new text begin (a)
Section 15.0597 shall apply to all appointments and filling of vacancies, except for the
commissioner.
new text end

new text begin (b) Membership terms, compensation, and removal of members are as provided
in section 15.0575.
new text end

new text begin (c) Initial appointments to the board must be made by July 1, 2014.
new text end

new text begin (d) Initial terms are as follows:
new text end

new text begin (1) for members appointed under paragraph (a), clause (1), the governor shall
designate two to an initial term of two years and two to an initial term of four years;
new text end

new text begin (2) for members appointed under paragraph (a), clause (2), the speaker of the house
shall designate one to an initial term of one year and one to an initial term of three years; and
new text end

new text begin (3) for members appointed under paragraph (a), clause (3), the majority leader of
the senate shall designate one to an initial term of one year, and one to an initial term
of three years.
new text end

new text begin Subd. 4. new text end

new text begin Quorum. new text end

new text begin A majority of the members appointed and serving shall
constitute a quorum for the transaction of any business.
new text end

new text begin Subd. 5. new text end

new text begin Initial meeting. new text end

new text begin The commissioner of management and budget must
convene the initial meeting of the board by August 1, 2014.
new text end

new text begin Subd. 6. new text end

new text begin Board duties and powers. new text end

new text begin The board shall have the power and authority
to do all of the following:
new text end

new text begin (1) appoint a plan administrator, employ staff, determine the duties of the plan
administrator and other staff as necessary, and set their compensation;
new text end

new text begin (2) make provisions for the payment of costs of administration and operation of
the trust;
new text end

new text begin (3) allocate administrative fees to each individual retirement account on a pro rata
basis;
new text end

new text begin (4) design and establish the process for the enrollment of plan participants;
new text end

new text begin (5) evaluate and establish the process by which an eligible employer is able to
forward contributions and related information to the plan or its agents, which may include,
but is not limited to:
new text end

new text begin (i) existing processes and arrangements used for the deposit and administration
of tax required to be deducted and withheld relating to the collection of income tax at
source on wages, or for the deposit of tax required to be paid under the unemployment
insurance system; or
new text end

new text begin (ii) financial services companies and third-party administrators with the capability to
receive and process information on plan participants and contributions by payroll deposit
retirement savings arrangement or other arrangements authorized by this chapter;
new text end

new text begin (6) determine the eligibility of employers, employees, or other individuals to
participate in the plan as necessary;
new text end

new text begin (7) evaluate and establish the process by which an individual or an employee of a
nonparticipating employer may enroll in and make contributions to the plan;
new text end

new text begin (8) determine the means and plan conditions by which to maximize eligible
employee participation in the plan;
new text end

new text begin (9) set minimum and maximum contribution levels in accordance with contribution
limits set for IRAs and 401(a) accounts by the Code;
new text end

new text begin (10) explore and establish investment policies that offer employees returns on
contributions and the conversion of individual plan account balances to secure retirement
income or annuitization, without incurring debt or liabilities to the state;
new text end

new text begin (11) procure insurance indemnifying each member of the board from personal loss
or liability resulting from a member's action or inaction as a member of the board;
new text end

new text begin (12) evaluate and recommend appropriate incentives for compliance and penalties
for noncompliance with the rules and requirements for participation in the plan;
new text end

new text begin (13) promulgate rules to implement this act and to govern the trust, the plan, and
participation in the plan; and
new text end

new text begin (14) report the following annually beginning December 1, 2015, to the majority
leader of the senate, the speaker of the house, and the chairs of the house of representatives
and senate committees with primary jurisdiction over retirement systems and associations:
new text end

new text begin (i) estimates of the average amount of savings and other financial resources that are
recommended for a financially secure retirement in Minnesota;
new text end

new text begin (ii) estimates of the relative progress toward achieving the savings recommended for
a financially secure retirement by age, gender, race, ethnicity, and plan eligibility;
new text end

new text begin (iii) the number of eligible employees, participating employers, and plan participants
in Minnesota;
new text end

new text begin (iv) the total assets in the trust and average plan account assets by age;
new text end

new text begin (v) the annual fee as a percentage of the average daily net assets of the plan; and
new text end

new text begin (vi) the estimated impact on publicly funded social safety net programs attributable
to insufficient retirement savings.
new text end

new text begin Subd. 7. new text end

new text begin Expiration. new text end

new text begin The board expires January 1, 2020.
new text end

Sec. 6.

new text begin [352G.06] INFORMATION, DATA, AND DISCLOSURE.
new text end

new text begin Subdivision 1. new text end

new text begin Employee information packet. new text end

new text begin Prior to opening the plan for
enrollment, the board shall design and disseminate an employee information packet to
all eligible employers. The packet must include background information on the plan and
appropriate disclosures for employees, as well as a sample enrollment form to be used by
employees to provide written authorization for payroll deductions for plan contributions.
new text end

new text begin Subd. 2. new text end

new text begin Disclosure form. new text end

new text begin (a) The disclosure form must include, but not be limited
to, all of the following:
new text end

new text begin (1) the benefits and risks associated with making contributions to the plan;
new text end

new text begin (2) how to make contributions to the plan;
new text end

new text begin (3) how to suspend contributions to the plan;
new text end

new text begin (4) the process for withdrawal of retirement savings; and
new text end

new text begin (5) how to obtain additional information on the plan.
new text end

new text begin (b) In addition, the disclosure form must clearly articulate the following:
new text end

new text begin (1) employees seeking financial advice must be instructed to contact a financial
advisor for financial advice, and employees must be advised that employers are not in
a position to provide financial advice, and that employers are not liable for decisions
employees make pursuant to this chapter;
new text end

new text begin (2) the plan is not an employer-sponsored retirement plan; and
new text end

new text begin (3) the trust is not guaranteed by the state.
new text end

new text begin Subd. 3. new text end

new text begin Data. new text end

new text begin Data on plan participants and individuals' plan accounts and 401(a)
accounts are private data on individuals or nonpublic data as defined in section 13.02.
new text end

Sec. 7.

new text begin [352G.08] SEVERABILITY.
new text end

new text begin Should any part of this act be declared invalid or unenforceable, or the enforcement
or compliance with it is suspended, restrained, or barred, either by the state or by the final
judgment of a court of competent jurisdiction, the remainder of this act shall remain
in full force and effect.
new text end

Sec. 8. new text begin REPORT.
new text end

new text begin The board must report the following no later than December 1, 2014, to the majority
leader of the senate, the speaker of the house, and the chairs of the house of representatives
and senate committees with primary jurisdiction over retirement systems and associations:
new text end

new text begin (1) estimates of the average amount of savings and other financial resources that
residents of Minnesota have upon retirement;
new text end

new text begin (2) estimates of the average amount of savings and other financial resources that are
recommended for a financially secure retirement in Minnesota;
new text end

new text begin (3) estimates of the relative progress toward achieving the savings recommended for
a financially secure retirement by age, gender, race, ethnicity, and plan eligibility;
new text end

new text begin (4) the number of eligible employees in Minnesota;
new text end

new text begin (5) the estimated impact on publicly funded social safety net programs attributable
to insufficient retirement savings;
new text end

new text begin (6) options for structuring contributions to the plan that achieve the purposes in
Minnesota Statutes, section 352G.02, subdivision 2, including contribution mechanism
and applicability of the Code, and portability under the Code;
new text end

new text begin (7) options for ensuring that benefits provide for stable income throughout
beneficiaries' retirement years, including the use of insurance against loss in connection
with the property, assets, or activities of the trust, or private underwriting or reinsurance to
manage risk and ensure a minimum rate of return;
new text end

new text begin (8) projected fees, pursuant to Minnesota Statutes, section 352G.03, subdivision
3, relative to asset size and plan structure, with estimates of investment-related fees
determined in consultation with the State Board of Investment;
new text end

new text begin (9) the cost to participating employers relative to plan structure;
new text end

new text begin (10) the aggregate economic effect of plan options within the state; and
new text end

new text begin (11) any changes to state law required to:
new text end

new text begin (i) implement the plan;
new text end

new text begin (ii) open the plan to enrollment;
new text end

new text begin (iii) achieve the purpose in Minnesota Statutes, section 352G.02; and
new text end

new text begin (iv) facilitate the responsibilities of the board in Minnesota Statutes, section 352G.05.
new text end

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

new text begin Sections 1 to 8 are effective the day following final enactment.
new text end