Alabama 2025 Regular Session

Alabama Senate Bill SB173 Compare Versions

Only one version of the bill is available at this time.

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1	1	SB173INTRODUCED
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3	3	SB173
4	4	N22R8TJ-1
5	5	By Senators Stewart, Hatcher, Coleman, Figures,
6	6	Coleman-Madison, Beasley, Singleton, Sessions, Williams,
7	7	Chesteen, Smitherman
8	8	RFD: Finance and Taxation General Fund
9	9	First Read: 13-Feb-25
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16	16	7 N22R8TJ-1 02/13/2025 CD (F)CD 2024-2474
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18	18	First Read: 13-Feb-25
19	19	SYNOPSIS:
20	20	Currently, there are Alabamians employed in the
21	21	private sector that are not offered or provided a
22	22	retirement plan through their employer. This bill would
23	23	create a state facilitated retirement savings program
24	24	to allow certain employed Alabamians to make
25	25	contributions into a retirement plan.
26	26	A BILL
27	27	TO BE ENTITLED
28	28	AN ACT
29	29	Relating to private sector employers and employees; to
30	30	create the Alabama Retirement Savings Program for the purpose
31	31	of promoting greater retirement savings for private sector
32	32	employees in a convenient, low cost, and portable manner.
33	33	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
34	34	Section 1. The Legislature finds that there is a
35	35	retirement savings access gap; Americans reach the median
36	36	salary four years later than they did in 1980 and therefore
37	37	have four fewer years of savings opportunities; and that one
38	38	in six Americans retire in poverty. Employees who are unable
39	39	to effectively build their retirement savings risk living on
40	40	low incomes in their elderly years and are more likely to
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70	70	low incomes in their elderly years and are more likely to
71	71	become dependent on state services. The Legislature further
72	72	finds that a state facilitated retirement savings program
73	73	would remove barriers to entry into the retirement market for
74	74	businesses by educating eligible employers on plan
75	75	availability and promoting, without mandated participation,
76	76	qualified, low-cost, and low-burden retirement savings
77	77	vehicles and without posing any significant financial burden
78	78	upon taxpayers. To this end, the legislation, upon
79	79	implementation will help close the retirement savings access
80	80	gap, protect the fiscal stability of the state and its
81	81	citizens well into the future, and will educate and promote
82	82	retirement saving among employees.
83	83	Section 2. For purposes of this act the following terms
84	84	have the following meanings:
85	85	(1) ALABAMA RETIREMENT SAVINGS PROGRAM or PROGRAM. The
86	86	retirement savings program created to connect eligible
87	87	employers and their employees with approved plans to increase
88	88	retirement savings.
89	89	(2) APPROVED PLANS. Retirement plans offered by the
90	90	Alabama Retirement Savings Program that meet the requirements
91	91	of this chapter.
92	92	(3) DEPARTMENT. The Alabama Department of Workforce.
93	93	(4) ELIGIBLE EMPLOYER. A self-employed individual, sole
94	94	proprietor, or an independently owned, for-profit enterprise
95	95	with 500 or fewer employees at the time of enrollment.
96	96	(5) ENROLLEE. Any employee who is voluntarily enrolled
97	97	in an approved plan offered by an eligible employer.
98	98	(6) FUND. The Alabama Retirement Savings Program Fund.
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128	128	(6) FUND. The Alabama Retirement Savings Program Fund.
129	129	(7)INDIVIDUAL RETIREMENT ARRANGEMENT. A retirement
130	130	savings account which allows employees to save for their
131	131	retirement by contributing pre-tax or after-tax dollars.
132	132	(8) PARTICIPATING EMPLOYER. Any eligible employer that
133	133	provides a payroll deposit retirement savings arrangement
134	134	provided under this act for its employees who are enrolled in
135	135	an approved plan offered through the Alabama Facilitated
136	136	Retirement Savings Program.
137	137	(9) QUALIFIED EMPLOYEE. Employees defined by the
138	138	federal Internal Revenue Service to be eligible to participate
139	139	in a specific qualified plan.
140	140	(10) SECRETARY. The Secretary of the Alabama Department
141	141	of Workforce.
142	142	(11) WAGES. Any compensation within the meaning of
143	143	Section 219(f)(1) of the Internal Revenue Code that is
144	144	received by an enrollee from a participating employer or
145	145	employee leasing company or professional employer organization
146	146	with which the enrollee's employer has an employee leasing
147	147	agreement.
148	148	Section 3. (a) A retirement savings program in the form
149	149	of an automatic enrollment payroll deduction IRA, known as the
150	150	Alabama Retirement Savings Program, shall be established and
151	151	administered by the Secretary of the Department of Workforce,
152	152	for the purpose of promoting greater retirement savings for
153	153	private sector employees in a convenient, low cost, and
154	154	portable manner.
155	155	(1) The Secretary of Workforce shall have the authority
156	156	to enter into contracts with other entities, including private
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186	186	to enter into contracts with other entities, including private
187	187	financial institutions, to design, manage, invest, or
188	188	otherwise administer the program on behalf of the department.
189	189	Contracts for professional services entered into by the
190	190	Secretary shall be entered into by competitive sealed
191	191	proposals pursuant to division 3, commencing with Section
192	192	41-4-130 of Article 5 of Chapter 4 of title 41.
193	193	(2) The Alabama Retirement Savings Program Fund is
194	194	established as a special fund, separate and apart from all
195	195	public monies or funds of this state. The fund shall include
196	196	the individual retirement accounts of enrollees, which shall
197	197	be accounted for as individual accounts. Monies in the fund
198	198	shall consist of monies received from enrollees directly and
199	199	through participating employers pursuant to automatic payroll
200	200	deductions and contributions to savings made pursuant to this
201	201	act. The fund shall be operated in a manner determined by the
202	202	secretary exclusively for the purpose of this act without
203	203	liability on the part of the state beyond the amounts paid
204	204	into and earned by the fund, provided that the fund is
205	205	operated so that the accounts of enrollees established under
206	206	the program meet the requirements for IRAs under the Internal
207	207	Revenue Code.
208	208	(b) The amounts deposited in the fund shall not
209	209	constitute property of the state, and the fund shall not be
210	210	construed to be a department, institution, or agency of the
211	211	state. Amounts on deposit in the fund shall not be commingled
212	212	with State funds and the state shall have no claim to or
213	213	against, or interest in, such funds.
214	214	Section 4. Alabama Retirement Savings Administrative
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244	244	Section 4. Alabama Retirement Savings Administrative
245	245	Fund is created in the State Treasury. The fund shall be
246	246	administered by the secretary of the department and used
247	247	exclusively for the purposes of this act. The department shall
248	248	use monies in this administrative fund to pay for the
249	249	administrative expenses it incurs in the performance of its
250	250	duties under this act. The department shall use monies in this
251	251	administrative fund to cover startup administrative expenses
252	252	it incurs in the performance of its duties under this act.
253	253	This administrative fund may receive grants or other monies
254	254	designated for administrative purposes from the state or any
255	255	unit of federal or local government or any other person, firm,
256	256	partnership, or corporation. Any interest earnings that are
257	257	attributable to monies in this fund shall be credited to this
258	258	administrative fund. All funds deposited or transferred into
259	259	this fund shall be budgeted and allocated in accordance with
260	260	Sections 41-4-80 through 41-4-96, Code of Alabama 1975, and
261	261	Sections 41-19-1 through 41-19-12, Code of Alabama 1975.
262	262	Section 5. (a) The department, secretary, and any other
263	263	agents or employees appointed or engaged by the Department of
264	264	Workforce and all persons serving as program staff shall
265	265	discharge their duties with respect to the program solely in
266	266	the interest of the program's enrollees and beneficiaries as
267	267	follows the duties of the Department of Workforce:
268	268	(1) By investing with the care, skill, prudence, and
269	269	diligence under the prevailing circumstances that a prudent
270	270	person acting in a like capacity and familiar with those
271	271	matters would use in the conduct of an enterprise of a similar
272	272	character and with similar aims; and
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302	302	character and with similar aims; and
303	303	(2) By using any contributions paid by employees
304	304	directly and through participating employers pursuant to
305	305	automatic payroll deductions and contributions into the fund
306	306	exclusively for the purpose of paying benefits to the
307	307	enrollees of the program, for the cost of administration of
308	308	the program, and for investments made for the benefit of the
309	309	program.
310	310	(b) The secretary shall ensure that the establishment
311	311	design and operation of the program is in a manner that meets
312	312	all of the following:
313	313	(1) Is in accordance with best practices for retirement
314	314	savings vehicles.
315	315	(2) Maximizes participation, savings, and sound
316	316	investment practices.
317	317	(3) Maximizes simplicity, including ease of
318	318	administration for participating employers and enrollees.
319	319	(4) Provides an efficient product to enrollees by
320	320	pooling investment funds.
321	321	(5) Ensures the portability of benefits.
322	322	(6) Provides for the deaccumulation of enrollee assets
323	323	in a manner that maximizes financial security in retirement.
324	324	Section 6. (a) In addition to the other duties and
325	325	responsibilities, the department may:
326	326	(1) Explore and establish investment options, subject
327	327	to Section 8, that offer employees returns on contributions
328	328	and the conversion of individual retirement savings account
329	329	balances to secure retirement income without incurring debt or
330	330	liabilities to the state.
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360	360	liabilities to the state.
361	361	(2) Establish the process by which interest, investment
362	362	earnings, and investment losses are allocated to individual
363	363	program accounts on a pro rata basis and are computed at the
364	364	interest rate on the balance of an individual's account.
365	365	(3) Make and enter into contracts necessary for the
366	366	administration of the program and the fund, including, but not
367	367	limited to, retaining and contracting with investment
368	368	managers, private financial institutions, other financial and
369	369	service providers, consultants, actuaries, counsel, auditors,
370	370	third-party administrators, and other professionals as
371	371	necessary. Contracts for professional services entered into by
372	372	the department shall be entered into by competitive sealed
373	373	proposals pursuant to Division 3, commencing with Section
374	374	41-4-13 of Article 5 of Chapter 4 of Title 41.
375	375	(4) Conduct a review of the performance of any
376	376	investment vendors not less than once every two years,
377	377	including, but not limited to, a review of returns, fees, and
378	378	customer service and post a copy on an Internet website
379	379	established and maintained by the Department.
380	380	(5) Determine the number of staff members and duties
381	381	needed to administer the program.
382	382	(6) Ensure that monies in the Alabama Retirement
383	383	Savings Program Fund are held and invested as pooled
384	384	investments described in Section 8, with a view to achieving
385	385	cost savings through efficiencies and economies of scale;
386	386	(7) Evaluate and establish the process by which an
387	387	enrollee is able to contribute a portion of the enrollees
388	388	wages, a minimum of three percent, to the program for
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418	418	wages, a minimum of three percent, to the program for
419	419	automatic deposit of those contributions and the process by
420	420	which the participating employer provides a payroll deposit
421	421	retirement savings arrangement to forward those contributions
422	422	and related information to the program, including, but not
423	423	limited to, contracting with financial service companies and
424	424	third-party administrators with the capability to receive and
425	425	process employee information and contributions for payroll
426	426	deposit retirement savings arrangements or similar
427	427	arrangements.
428	428	(8) Design and establish the process for enrollment by
429	429	an employee pursuant to Section 9, including the process by
430	430	which an employee can opt not to participate in the program,
431	431	select a contribution level, increase the contribution level,
432	432	select an investment option, such as a Traditional IRA or ROTH
433	433	IRA, and terminate participation in the program.
434	434	(9) Evaluate and establish the process by which an
435	435	individual may voluntarily enroll in and make contributions to
436	436	the program.
437	437	(10) Accept any grants, appropriations, or other monies
438	438	from the state, any unit of federal, state, or local
439	439	government or any other person, firm, partnership, or
440	440	corporation solely for deposit into the fund, whether for
441	441	investment or administrative purposes.
442	442	(11) Evaluate the need for, and procure as needed,
443	443	insurance against any and all loss in connection with the
444	444	property, assets, or activities of the program.
445	445	(12) Make provisions for the payment of administrative
446	446	costs and expenses for the creation, management, and operation
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476	476	costs and expenses for the creation, management, and operation
477	477	of the program and keep annual administrative fees as low as
478	478	possible, but in no event shall annual administrative fees
479	479	exceed 0.6 percent of the fund’s total balance, except that,
480	480	during the first three years after the establishment of the
481	481	program annual administrative fees may be set at not more than
482	482	0.75 percent of the funds total balance. Administrative fees
483	483	shall include any investment fees incurred pursuant to this
484	484	section. Subject to appropriation, the state may pay
485	485	administrative costs associated with the creation and
486	486	management of the program until sufficient assets are
487	487	available in the fund for that purpose. Thereafter, all
488	488	administrative costs of the program, including repayment of
489	489	any funds provided by the state, shall be paid only out of
490	490	monies on deposit therein, except that, private funds or
491	491	federal funding received under subdivision (10) in order to
492	492	implement the program shall not be repaid unless those funds
493	493	were offered contingent upon the promise of repayment.
494	494	(13) Allocate administrative fees to individual
495	495	retirement accounts in the program on a pro rata basis.
496	496	(14) Set a minimum employee contribution amount of
497	497	three percent.
498	498	(15) Facilitate education and outreach to employers and
499	499	employees, including the promotion of the benefits of
500	500	retirement savings and other information that promote
501	501	financial literacy necessary for sound financial
502	502	decision-making.
503	503	(16) Facilitate compliance by the program with all
504	504	applicable requirements for the program under the Internal
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534	534	applicable requirements for the program under the Internal
535	535	Revenue Code, including tax qualification requirements or any
536	536	other applicable law and accounting requirements.
537	537	(17) Carry out the duties and obligations of the
538	538	program in an effective, efficient, and low-cost manner; and
539	539	(18) Exercise any and all other powers reasonably
540	540	necessary for the effectuation of the purposes, objectives,
541	541	and provisions of this act pertaining to the program.
542	542	Section 7. (a) The program administration shall
543	543	annually prepare and adopt a written statement of investment
544	544	policy that includes a risk management and oversight program.
545	545	The risk management and oversight program shall be designed to
546	546	ensure that an effective risk management system is in place to
547	547	monitor the risk levels of the program and to ensure that the
548	548	risks taken are prudent and properly managed, to provide an
549	549	integrated process for overall risk management, and to assess
550	550	investment returns as well as risk to determine if the risks
551	551	taken are adequately compensated compared to applicable
552	552	performance benchmarks and standards. The program
553	553	administration shall submit the statement of investment policy
554	554	and any changes in the investment policy to the secretary of
555	555	the department.
556	556	(b) An audited financial report, prepared in accordance
557	557	with generally accepted accounting principles, on the
558	558	operations of the program for each calendar year, shall be
559	559	submitted to the Secretary no later than July 1 of the
560	560	following year; The annual audit shall be made by an
561	561	independent certified public accountant and shall include, but
562	562	is not limited to, direct and indirect costs attributable to
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592	592	is not limited to, direct and indirect costs attributable to
593	593	the use of outside consultants, independent contractors, and
594	594	any other persons who are not state employees for the
595	595	administration of the program.
596	596	(c) A report prepared by the Department of Workforce
597	597	shall include, but not be limited to, a summary of the
598	598	benefits provided by the program, the number of enrollees in
599	599	the program, the percentage and number of investment options,
600	600	rates of return, fees paid to any vendors or contractors for
601	601	purposes of implementing or operating the program, and other
602	602	information that is relevant to make a full, fair, and
603	603	effective disclosure of the operations of the program and the
604	604	funds.
605	605	(d) The department shall make available to the public
606	606	on its Internet website all reports provided to the
607	607	department. In addition to any other statements or reports
608	608	required by law, the department shall provide periodic reports
609	609	at least annually to: (i) participating employers, the names
610	610	of each enrollee employed by the participating employer, and
611	611	the contribution amounts made through the participating
612	612	employer on behalf of each enrolled employee from automatic
613	613	payroll deductions and contributions during the reporting
614	614	period; and (ii) enrollees, the balances in their program
615	615	accounts for the reporting period, including the allocation of
616	616	contributions and investment income to, and any withdrawals
617	617	made from their program accounts. The reports may include any
618	618	other information regarding the program as the secretary
619	619	determines is appropriate.
620	620	Section 8. (a) The secretary shall ensure that monies
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650	650	Section 8. (a) The secretary shall ensure that monies
651	651	in the fund be invested or reinvested, as the case may be, in
652	652	compliance with any and all applicable federal and state laws,
653	653	rules, and regulations, as well as any and all rules or
654	654	regulations adopted by the department with respect to the
655	655	program and the investment of the fund, including, but not
656	656	limited to, the investment policy.
657	657	(b) The secretary may require the establishment of any
658	658	or all of the following investment options:
659	659	(1) A capital preservation fund, which prioritizes the
660	660	security of the deposit over the rate of return. If the
661	661	capital preservation fund is established, the department may
662	662	provide that the first one thousand dollars ($1,000) in
663	663	contributions made by, or on behalf of, an enrollee shall be
664	664	deposited into the capital preservation fund and the
665	665	department may provide for an account revocation period during
666	666	which, if the enrollee chooses to end participation in the
667	667	program, the enrollee may withdraw the deposited amounts from
668	668	the capital preservation fund without penalty or.
669	669	(2) a life-cycle fund or.
670	670	(3) any other investment option deemed appropriate
671	671	by the secretary.
672	672	(c) The secretary may designate by rule or
673	673	regulation one of the investment options as the default
674	674	investment option for enrollees who fail to elect an
675	675	investment option and may, from time to time, amend, modify,
676	676	or repeal such investment options as it deems necessary or
677	677	proper and may subsequently select, by rule or regulation, a
678	678	different investment option as the default investment option.
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708	708	different investment option as the default investment option.
709	709	Section 9. (a) The program shall be implemented, and
710	710	the enrollment of employees shall begin, within 24 months
711	711	after the effective date of this act. The Secretary of
712	712	Workforce may extend the time period within which the program
713	713	is implemented and enrollment of employees begins, but not by
714	714	more than 12 months. The program shall be implemented in two
715	715	phases based on the size of the employers participating, as
716	716	measured by the number of employees per employer, with the
717	717	program implemented sooner for larger employers. The following
718	718	provisions of this section shall be in force after the program
719	719	opens for enrollment.
720	720	(b) Each employer shall establish a payroll deposit
721	721	retirement savings arrangement to allow each employee to
722	722	participate in the program not more than nine months after the
723	723	program opens for enrollment.
724	724	(c) Employers shall automatically enroll in the program
725	725	each employee who has not opted out of participation in the
726	726	program and shall provide payroll deposit retirement savings
727	727	arrangements for participating employees and, on behalf of the
728	728	employees, remit payroll deduction contributions to the
729	729	program. Eligible employers shall provide payroll deposit
730	730	retirement savings arrangements for each employee who elects
731	731	to participate in the program.
732	732	(d) Enrollees shall have the ability to select a
733	733	contribution level into the fund. This level may be expressed
734	734	as a percentage of wages or as a dollar amount up to the
735	735	deductible amount for the enrollee's taxable year under
736	736	Section 219(b)(1)(A) of the Internal Revenue Code. Enrollees
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766	766	Section 219(b)(1)(A) of the Internal Revenue Code. Enrollees
767	767	may change their contribution level no more than once every
768	768	calendar quarter, subject to rules and regulations adopted by
769	769	the Secretary and Department of Workforce, as long as the
770	770	contributions do not cause the enrollee's total contributions
771	771	to IRAs for the year to exceed the deductible amount for the
772	772	enrollee's taxable year under Section 219(b)(1)(A) of the
773	773	Internal Revenue Code.
774	774	(e) Following initial implementation of the program
775	775	pursuant to this section, at least once every year,
776	776	participating employers shall designate an open enrollment
777	777	period during which employees who previously opted out of the
778	778	program may enroll in the program.
779	779	(f) (1) For any employee hired by an employer more than
780	780	six months after the program opens for enrollment, the
781	781	employer shall enroll the employee in the program no later
782	782	than three months following the date of hire of the employee,
783	783	unless the employee opts out of enrollment in the program.
784	784	(2) Any newly hired employee who has previously been
785	785	enrolled in the program shall have the option of making direct
786	786	contributions into that employees existing account, provided
787	787	that subdivision paragraph (1) also applies to the employer of
788	788	a newly hired employee who has been previously enrolled in the
789	789	program.
790	790	(g) An employee who opts out of the program who
791	791	subsequently wants to participate through the participating
792	792	employer's payroll deposit retirement savings arrangement may
793	793	only enroll during the participating employer's designated
794	794	open enrollment period or if permitted by the participating
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824	824	open enrollment period or if permitted by the participating
825	825	employer at an earlier time.
826	826	(h) An employee may terminate his or her participation
827	827	in the program at any time in a manner prescribed by the
828	828	secretary.
829	829	(i) The department may establish and maintain an
830	830	Internet website designed to assist employers in identifying
831	831	private sector providers of retirement arrangements that can
832	832	be set up by the employer rather than allowing employee
833	833	participation in the program under this act. The department
834	834	shall provide public notice of the availability of and the
835	835	process for inclusion on the Internet website before it
836	836	becomes publicly available.
837	837	(j) Each employer is responsible for the tasks
838	838	described in subsections (b) and (c), but the employer is
839	839	permitted to contract with a third party, such as a payroll
840	840	service provider or a professional employer organization, to
841	841	perform those tasks on behalf of the employer.
842	842	Section 10. (a) Participating employers shall not have
843	843	any liability for an employee's decision to participate in or
844	844	opt out of the program or for the investment decisions of the
845	845	department or of any enrollee.
846	846	(b) The program is not an employer-sponsored plan and
847	847	is not operated or administered by the employer. A
848	848	participating employer shall not be a fiduciary, or considered
849	849	to be a fiduciary, over the program and shall not be liable
850	850	with regard to investment returns, program design, and
851	851	benefits paid to the program participants. A participating
852	852	employer shall not bear responsibility for the administration,
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882	882	employer shall not bear responsibility for the administration,
883	883	investment, or investment performance of the program or for
884	884	any required or permitted communications between participating
885	885	employees and program administrators.
886	886	Section 11. (a) If any clause, sentence, paragraph,
887	887	section, or other part of this act shall be adjudged by any
888	888	court of competent jurisdiction to be invalid, including any
889	889	judgment made that the part is unconstitutional, invalid, or
890	890	inoperative, the judgment shall not affect, impair, or
891	891	invalidate the remainder of this act but shall be confined in
892	892	its operation to the clause, sentence, paragraph, section, or
893	893	other part directly involved in the controversy in which the
894	894	judgment shall have been rendered.
895	895	(b) Notwithstanding the provisions of any other law to
896	896	the contrary, the value of assets in an individual’s account
897	897	under the program shall not be regarded as assets for the
898	898	purposes of determining eligibility for benefits or the amount
899	899	of benefits to be provided pursuant to any state or federal
900	900	law, except that, if the federal law expressly requires that
901	901	the assets in the accounts be regarded as assets for those
902	902	purposes, the assets may be taken into consideration when
903	903	determining eligibility benefits or the amount of benefits.
904	904	Provided further that, if the federal law provides discretion
905	905	to the state in setting standards regarding the amount of
906	906	assets which may be disregarded in determining benefits, or
907	907	other factors regarding the assets which impact the
908	908	eligibility for, or amount of, benefits, the state shall, with
909	909	respect to assets in the assets in the accounts under the
910	910	program, set standards which are as favorable as the federal
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940	940	program, set standards which are as favorable as the federal
941	941	law permits for the individuals with the accounts.
942	942	Section 12. This act shall become effective on June 1,
943	943	2025.
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