SF 2303

as introduced - 90th Legislature (2017 - 2018) Posted on 04/19/2017 09:20am

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 of 2017."
new text end

Sec. 2.

new text begin [187.02] STATEMENT OF PURPOSE.
new text end

new text begin The state creates and establishes a public-private partnership model for privately
employed workers to save for retirement for the following reasons:
new text end

new text begin (1) for millions of Americans, including hundreds of thousands of Minnesotans, a secure
retirement is not attainable, with nearly half of working-age households having no more
than approximately $40,000 in retirement savings;
new text end

new text begin (2) Americans who do not have access to a retirement savings plan through their
workplace are more likely to rely on Social Security as their only source of retirement
income;
new text end

new text begin (3) in Minnesota, the average monthly Social Security benefit is $1,200, with nearly 30
percent of seniors relying on Social Security as their sole source of income;
new text end

new text begin (4) increased retirement savings can save Minnesota taxpayers an estimated $124,500,000
million over a span of ten years in Medicaid savings alone; and
new text end

new text begin (5) research has shown that offering workers a way to save through their job increases
their ability to save dramatically and promotes individual responsibility and financial
freedom.
new text end

Sec. 3.

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 a person who is employed by
an eligible employer and who, for the immediately preceding calendar year, worked 500 or
more hours of service for the eligible employer. Once a person has 500 or more hours of
service in a calendar year, the person continues to be an eligible employee even if the person
has fewer than 500 hours of service in the current or any future calendar year. Eligible
employee does not include a person 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 "Eligible employer" means a person or entity engaged in
a business, industry, profession, trade, or other enterprise in the state, whether for profit or
not for profit, that does not sponsor or contribute to, on behalf of its employees, a retirement
savings plan. Eligible employer does not include an employer that has not been in business
at any time during the immediately preceding calendar year.
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 by 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, which
consists of the secure choice individual retirement account plan (IRAP) and the secure
choice multiple employer retirement plan (MERP).
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 or program
that permits contributions to be set aside for retirement, provides for the deferral of income
tax on the contributions, unless the employee elects to contribute after-tax amounts, and
permits all employees to participate except employees who have not satisfied participation
eligibility requirements that are no more restrictive than the eligibility requirements permitted
under section 410(b) of the Internal Revenue Code. 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 multiple employer retirement plan or MERP. new text end

new text begin "Secure choice
multiple employer retirement plan" or "MERP" means the plan established under section
187.04.
new text end

new text begin Subd. 15. new text end

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

new text begin "Secure choice retirement savings
trust" is a trust established to hold contributions and investment earnings on funds contributed
under the IRAP or the MERP. A separate trust may be established for the IRAP and the
MERP.
new text end

Sec. 4.

new text begin [187.04] SECURE CHOICE MULTIPLE EMPLOYER RETIREMENT
PLAN.
new text end

new text begin Subdivision 1. new text end

new text begin MERP established. new text end

new text begin The board shall design, establish, and maintain, as
plan sponsor, a qualified defined contribution plan within the meaning of section 414(i) of
the Internal Revenue Code that satisfies the requirements of section 413(c) of the Internal
Revenue Code as a multiple employer plan. The plan documents for the MERP shall:
new text end

new text begin (1) include an adoption agreement in which an eligible employer can select terms and
conditions to allow the plan to meet the needs of the employer's particular workforce;
new text end

new text begin (2) provide eligible employers with the option to make employer contributions or
employee contributions by payroll deduction or a combination of employer and payroll
deduction employee contributions; and
new text end

new text begin (3) preclude the employer from electing a contribution rate for employee or employer
contributions that is lower than the entry-level contribution rate for the IRAP.
new text end

new text begin Subd. 2. new text end

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

new text begin The board shall:
new text end

new text begin (1) submit the MERP plan documents to the Internal Revenue Service for a determination
that the MERP satisfies the applicable requirements of sections 401(a) and 413(c) of the
Internal Revenue Code; and
new text end

new text begin (2) shall administer the MERP in compliance with sections 401(a) and 413(c) of the
Internal Revenue Code and all other applicable federal and state laws, including ERISA.
new text end

new text begin Subd. 3. new text end

new text begin Eligible employer participation. new text end

new text begin The executive director shall enter into a
participation agreement with each eligible employer that submits an application to participate
as a participating employer in the MERP and satisfies the eligibility conditions established
by the board.
new text end

new text begin Subd. 4. new text end

new text begin Contributions held in trust. new text end

new text begin Each eligible employer that becomes a participating
employer shall transmit employer contributions and employee payroll deduction
contributions, as applicable, to the MERP trust in the manner and according to the schedule
specified and established by the board.
new text end

Sec. 5.

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 shall 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 shall 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 shall 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. 6.

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 shall establish and
administer a trust for the MERP to hold and invest contributions under the MERP. The
board may establish and maintain 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, shall
maintain accounts for employer and employee contributions with respect to each employee
under the MERP and 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,
except for a domestic relations order that assigns all or a portion of an account in the MERP
to an alternate payee and satisfies the requirements to be considered a qualified domestic
relations order under section 206(d) of ERISA and section 414(p) of the Internal Revenue
Code.
new text end

Sec. 7.

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

new text begin Subdivision 1. new text end

new text begin Requirement to offer retirement savings plan. new text end

new text begin If an eligible employer
does not execute a participation agreement to become a participating employer in the secure
choice multiple employer retirement plan under section 187.04, the eligible employer shall
enroll eligible employees in the secure choice individual retirement account plan. If an
eligible employer offered a retirement savings plan within the last two years, the eligible
employer may not become a participating employer in the MERP, but shall automatically
enroll eligible employees in the IRAP. An eligible employer may become a participating
employer in the MERP no earlier than two years after the date as of which all assets in any
retirement savings plan sponsored by the eligible employer were distributed or otherwise
transferred to employees, former employees, or any eligible retirement plan, within the
meaning of section 402(c)(8) of the Internal Revenue Code.
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, prepared by the board, to all employees regarding the MERP or IRAP,
as applicable:
new text end

new text begin (1) for participating employers in the MERP, the information must be provided to an
employee no later than 30 days before the date the employee first begins participation in
the plan; or
new text end

new text begin (2) for employees contributing to an 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 and 2, 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 Minnesota attorney general has the power to enforce the
provisions of this chapter. The attorney general may impose, after due process, monthly or
quarterly penalties against any eligible employer that fails to comply with this section, in
an amount or amounts determined by the board. Proceeds of such penalties, after deducting
enforcement expenses, shall be deposited in a special revenue account and are appropriated
to the program.
new text end

Sec. 8.

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 The policy-making function of the program is vested in a
board of directors comprised of seven members as follows:
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) three members chosen by the Legislative Commission on Pensions and Retirement,
one from each of the following experience categories:
new text end

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

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

new text begin (4) 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, appointed
by the governor; and
new text end

new text begin (5) a small business owner or executive appointed by the governor.
new text end

new text begin Subd. 2. new text end

new text begin Appointment. new text end

new text begin Public members appointed by the governor shall be appointed
as provided in section 15.0597.
new text end

new text begin Subd. 3. 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 by the Legislative Commission on Pensions and Retirement
shall initially serve three, four, and five years, respectively; and
new text end

new text begin (3) the governor's appointees shall serve three-year terms.
new text end

new text begin (b) The appointing authorities must make their first appointments to the board by January
15, 2018.
new text end

new text begin Subd. 4. new text end

new text begin Membership terms. new text end

new text begin Except as provided in subdivision 3 for first appointees,
public members serve a term of four years.
new text end

new text begin Subd. 5. 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. 6. 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. 7. new text end

new text begin Chair. new text end

new text begin The Legislative Commission on Pensions and Retirement shall appoint
one of the members of the board of directors as its chair.
new text end

new text begin Subd. 8. new text end

new text begin Duties. new text end

new text begin In addition to the 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) take all actions required or advisable to ensure that the MERP is treated as a single
plan for purposes of the Internal Revenue Code and ERISA;
new text end

new text begin (10) 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 MERP or IRAP, as
applicable;
new text end

new text begin (ii) enrolling in the MERP or IRAP, as applicable;
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 MERP or IRAP, as applicable; and
new text end

new text begin (vi) a statement that employers are not liable for decisions employees make and 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 (11) 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 shall include but 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 report shall be provided to the chairs and ranking minority
members of the legislative committees with jurisdiction over jobs and economic development,
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) 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 report shall be provided to the chairs and ranking minority members of the
legislative committees with jurisdiction over jobs and economic development, the chair 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 (13) adopt rules to implement the program; and
new text end

new text begin (14) properly file all reports required under the Internal Revenue Code and ERISA for
the MERP and the IRAP.
new text end

new text begin Subd. 9. 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. 10. new text end

new text begin Liability; indemnification. new text end

new text begin A member of the board shall be indemnified and
held harmless by the state for the reasonable costs or expenses incurred as a result of any
actual or threatened litigation or administrative proceeding arising out of the performance
of the member's duties, except an action brought by the state or a state agency arising from
the failure of a board member to perform duties as prescribed in section 187.09.
new text end

Sec. 9.

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

new text begin Subdivision 1. new text end

new text begin Fiduciary duty for MERP. 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 sections 404 to 408 of ERISA,
to the extent any of them exercise fiduciary duty.
new text end

new text begin Subd. 2. new text end

new text begin Fiduciary duty for IRAP. 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. 10.

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. 11.

new text begin [187.11] SEVERABILITY.
new text end

new text begin If any provision of this chapter is found to be unconstitutional and void, the remaining
provisions of this chapter are valid.
new text end

Sec. 12. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 4 and 6 to 11 are effective the day following final enactment. Section 5 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
later.
new text end