SB173INTRODUCED
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SB173
N22R8TJ-1
By Senators Stewart, Hatcher, Coleman, Figures,
Coleman-Madison, Beasley, Singleton, Sessions, Williams,
Chesteen, Smitherman
RFD: Finance and Taxation General Fund
First Read: 13-Feb-25
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7 N22R8TJ-1 02/13/2025 CD (F)CD 2024-2474
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First Read: 13-Feb-25
SYNOPSIS:
Currently, there are Alabamians employed in the
private sector that are not offered or provided a
retirement plan through their employer. This bill would
create a state facilitated retirement savings program
to allow certain employed Alabamians to make
contributions into a retirement plan.
A BILL
TO BE ENTITLED
AN ACT
Relating to private sector employers and employees; to
create the Alabama Retirement Savings Program for the purpose
of promoting greater retirement savings for private sector
employees in a convenient, low cost, and portable manner.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. The Legislature finds that there is a
retirement savings access gap; Americans reach the median
salary four years later than they did in 1980 and therefore
have four fewer years of savings opportunities; and that one
in six Americans retire in poverty. Employees who are unable
to effectively build their retirement savings risk living on
low incomes in their elderly years and are more likely to
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low incomes in their elderly years and are more likely to
become dependent on state services. The Legislature further
finds that a state facilitated retirement savings program
would remove barriers to entry into the retirement market for
businesses by educating eligible employers on plan
availability and promoting, without mandated participation,
qualified, low-cost, and low-burden retirement savings
vehicles and without posing any significant financial burden
upon taxpayers. To this end, the legislation, upon
implementation will help close the retirement savings access
gap, protect the fiscal stability of the state and its
citizens well into the future, and will educate and promote
retirement saving among employees.
Section 2. For purposes of this act the following terms
have the following meanings:
(1) ALABAMA RETIREMENT SAVINGS PROGRAM or PROGRAM. The
retirement savings program created to connect eligible
employers and their employees with approved plans to increase
retirement savings.
(2) APPROVED PLANS. Retirement plans offered by the
Alabama Retirement Savings Program that meet the requirements
of this chapter.
(3) DEPARTMENT. The Alabama Department of Workforce.
(4) ELIGIBLE EMPLOYER. A self-employed individual, sole
proprietor, or an independently owned, for-profit enterprise
with 500 or fewer employees at the time of enrollment.
(5) ENROLLEE. Any employee who is voluntarily enrolled
in an approved plan offered by an eligible employer.
(6) FUND. The Alabama Retirement Savings Program Fund.
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(6) FUND. The Alabama Retirement Savings Program Fund.
(7)INDIVIDUAL RETIREMENT ARRANGEMENT. A retirement
savings account which allows employees to save for their
retirement by contributing pre-tax or after-tax dollars.
(8) PARTICIPATING EMPLOYER. Any eligible employer that
provides a payroll deposit retirement savings arrangement
provided under this act for its employees who are enrolled in
an approved plan offered through the Alabama Facilitated
Retirement Savings Program.
(9) QUALIFIED EMPLOYEE. Employees defined by the
federal Internal Revenue Service to be eligible to participate
in a specific qualified plan.
(10) SECRETARY. The Secretary of the Alabama Department
of Workforce.
(11) WAGES. Any compensation within the meaning of
Section 219(f)(1) of the Internal Revenue Code that is
received by an enrollee from a participating employer or
employee leasing company or professional employer organization
with which the enrollee's employer has an employee leasing
agreement.
Section 3. (a) A retirement savings program in the form
of an automatic enrollment payroll deduction IRA, known as the
Alabama Retirement Savings Program, shall be established and
administered by the Secretary of the Department of Workforce,
for the purpose of promoting greater retirement savings for
private sector employees in a convenient, low cost, and
portable manner.
(1) The Secretary of Workforce shall have the authority
to enter into contracts with other entities, including private
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to enter into contracts with other entities, including private
financial institutions, to design, manage, invest, or
otherwise administer the program on behalf of the department.
Contracts for professional services entered into by the
Secretary shall be entered into by competitive sealed
proposals pursuant to division 3, commencing with Section
41-4-130 of Article 5 of Chapter 4 of title 41.
(2) The Alabama Retirement Savings Program Fund is
established as a special fund, separate and apart from all
public monies or funds of this state. The fund shall include
the individual retirement accounts of enrollees, which shall
be accounted for as individual accounts. Monies in the fund
shall consist of monies received from enrollees directly and
through participating employers pursuant to automatic payroll
deductions and contributions to savings made pursuant to this
act. The fund shall be operated in a manner determined by the
secretary exclusively for the purpose of this act without
liability on the part of the state beyond the amounts paid
into and earned by the fund, provided that the fund is
operated so that the accounts of enrollees established under
the program meet the requirements for IRAs under the Internal
Revenue Code.
(b) The amounts deposited in the fund shall not
constitute property of the state, and the fund shall not be
construed to be a department, institution, or agency of the
state. Amounts on deposit in the fund shall not be commingled
with State funds and the state shall have no claim to or
against, or interest in, such funds.
Section 4. Alabama Retirement Savings Administrative
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Section 4. Alabama Retirement Savings Administrative
Fund is created in the State Treasury. The fund shall be
administered by the secretary of the department and used
exclusively for the purposes of this act. The department shall
use monies in this administrative fund to pay for the
administrative expenses it incurs in the performance of its
duties under this act. The department shall use monies in this
administrative fund to cover startup administrative expenses
it incurs in the performance of its duties under this act.
This administrative fund may receive grants or other monies
designated for administrative purposes from the state or any
unit of federal or local government or any other person, firm,
partnership, or corporation. Any interest earnings that are
attributable to monies in this fund shall be credited to this
administrative fund. All funds deposited or transferred into
this fund shall be budgeted and allocated in accordance with
Sections 41-4-80 through 41-4-96, Code of Alabama 1975, and
Sections 41-19-1 through 41-19-12, Code of Alabama 1975.
Section 5. (a) The department, secretary, and any other
agents or employees appointed or engaged by the Department of
Workforce and all persons serving as program staff shall
discharge their duties with respect to the program solely in
the interest of the program's enrollees and beneficiaries as
follows the duties of the Department of Workforce:
(1) By investing with the care, skill, prudence, and
diligence under the prevailing circumstances that a prudent
person acting in a like capacity and familiar with those
matters would use in the conduct of an enterprise of a similar
character and with similar aims; and
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character and with similar aims; and
(2) By using any contributions paid by employees
directly and through participating employers pursuant to
automatic payroll deductions and contributions into the fund
exclusively for the purpose of paying benefits to the
enrollees of the program, for the cost of administration of
the program, and for investments made for the benefit of the
program.
(b) The secretary shall ensure that the establishment
design and operation of the program is in a manner that meets
all of the following:
(1) Is in accordance with best practices for retirement
savings vehicles.
(2) Maximizes participation, savings, and sound
investment practices.
(3) Maximizes simplicity, including ease of
administration for participating employers and enrollees.
(4) Provides an efficient product to enrollees by
pooling investment funds.
(5) Ensures the portability of benefits.
(6) Provides for the deaccumulation of enrollee assets
in a manner that maximizes financial security in retirement.
Section 6. (a) In addition to the other duties and
responsibilities, the department may:
(1) Explore and establish investment options, subject
to Section 8, that offer employees returns on contributions
and the conversion of individual retirement savings account
balances to secure retirement income without incurring debt or
liabilities to the state.
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liabilities to the state.
(2) Establish the process by which interest, investment
earnings, and investment losses are allocated to individual
program accounts on a pro rata basis and are computed at the
interest rate on the balance of an individual's account.
(3) Make and enter into contracts necessary for the
administration of the program and the fund, including, but not
limited to, retaining and contracting with investment
managers, private financial institutions, other financial and
service providers, consultants, actuaries, counsel, auditors,
third-party administrators, and other professionals as
necessary. Contracts for professional services entered into by
the department shall be entered into by competitive sealed
proposals pursuant to Division 3, commencing with Section
41-4-13 of Article 5 of Chapter 4 of Title 41.
(4) Conduct a review of the performance of any
investment vendors not less than once every two years,
including, but not limited to, a review of returns, fees, and
customer service and post a copy on an Internet website
established and maintained by the Department.
(5) Determine the number of staff members and duties
needed to administer the program.
(6) Ensure that monies in the Alabama Retirement
Savings Program Fund are held and invested as pooled
investments described in Section 8, with a view to achieving
cost savings through efficiencies and economies of scale;
(7) Evaluate and establish the process by which an
enrollee is able to contribute a portion of the enrollees
wages, a minimum of three percent, to the program for
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wages, a minimum of three percent, to the program for
automatic deposit of those contributions and the process by
which the participating employer provides a payroll deposit
retirement savings arrangement to forward those contributions
and related information to the program, including, but not
limited to, contracting with financial service companies and
third-party administrators with the capability to receive and
process employee information and contributions for payroll
deposit retirement savings arrangements or similar
arrangements.
(8) Design and establish the process for enrollment by
an employee pursuant to Section 9, including the process by
which an employee can opt not to participate in the program,
select a contribution level, increase the contribution level,
select an investment option, such as a Traditional IRA or ROTH
IRA, and terminate participation in the program.
(9) Evaluate and establish the process by which an
individual may voluntarily enroll in and make contributions to
the program.
(10) Accept any grants, appropriations, or other monies
from the state, any unit of federal, state, or local
government or any other person, firm, partnership, or
corporation solely for deposit into the fund, whether for
investment or administrative purposes.
(11) Evaluate the need for, and procure as needed,
insurance against any and all loss in connection with the
property, assets, or activities of the program.
(12) Make provisions for the payment of administrative
costs and expenses for the creation, management, and operation
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costs and expenses for the creation, management, and operation
of the program and keep annual administrative fees as low as
possible, but in no event shall annual administrative fees
exceed 0.6 percent of the fund’s total balance, except that,
during the first three years after the establishment of the
program annual administrative fees may be set at not more than
0.75 percent of the funds total balance. Administrative fees
shall include any investment fees incurred pursuant to this
section. Subject to appropriation, the state may pay
administrative costs associated with the creation and
management of the program until sufficient assets are
available in the fund for that purpose. Thereafter, all
administrative costs of the program, including repayment of
any funds provided by the state, shall be paid only out of
monies on deposit therein, except that, private funds or
federal funding received under subdivision (10) in order to
implement the program shall not be repaid unless those funds
were offered contingent upon the promise of repayment.
(13) Allocate administrative fees to individual
retirement accounts in the program on a pro rata basis.
(14) Set a minimum employee contribution amount of
three percent.
(15) Facilitate education and outreach to employers and
employees, including the promotion of the benefits of
retirement savings and other information that promote
financial literacy necessary for sound financial
decision-making.
(16) Facilitate compliance by the program with all
applicable requirements for the program under the Internal
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applicable requirements for the program under the Internal
Revenue Code, including tax qualification requirements or any
other applicable law and accounting requirements.
(17) Carry out the duties and obligations of the
program in an effective, efficient, and low-cost manner; and
(18) Exercise any and all other powers reasonably
necessary for the effectuation of the purposes, objectives,
and provisions of this act pertaining to the program.
Section 7. (a) The program administration shall
annually prepare and adopt a written statement of investment
policy that includes a risk management and oversight program.
The risk management and oversight program shall be designed to
ensure that an effective risk management system is in place to
monitor the risk levels of the program and to ensure that the
risks taken are prudent and properly managed, to provide an
integrated process for overall risk management, and to assess
investment returns as well as risk to determine if the risks
taken are adequately compensated compared to applicable
performance benchmarks and standards. The program
administration shall submit the statement of investment policy
and any changes in the investment policy to the secretary of
the department.
(b) An audited financial report, prepared in accordance
with generally accepted accounting principles, on the
operations of the program for each calendar year, shall be
submitted to the Secretary no later than July 1 of the
following year; The annual audit shall be made by an
independent certified public accountant and shall include, but
is not limited to, direct and indirect costs attributable to
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is not limited to, direct and indirect costs attributable to
the use of outside consultants, independent contractors, and
any other persons who are not state employees for the
administration of the program.
(c) A report prepared by the Department of Workforce
shall include, but not be limited to, a summary of the
benefits provided by the program, the number of enrollees in
the program, the percentage and number of investment options,
rates of return, fees paid to any vendors or contractors for
purposes of implementing or operating the program, and other
information that is relevant to make a full, fair, and
effective disclosure of the operations of the program and the
funds.
(d) The department shall make available to the public
on its Internet website all reports provided to the
department. In addition to any other statements or reports
required by law, the department shall provide periodic reports
at least annually to: (i) participating employers, the names
of each enrollee employed by the participating employer, and
the contribution amounts made through the participating
employer on behalf of each enrolled employee from automatic
payroll deductions and contributions during the reporting
period; and (ii) enrollees, the balances in their program
accounts for the reporting period, including the allocation of
contributions and investment income to, and any withdrawals
made from their program accounts. The reports may include any
other information regarding the program as the secretary
determines is appropriate.
Section 8. (a) The secretary shall ensure that monies
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Section 8. (a) The secretary shall ensure that monies
in the fund be invested or reinvested, as the case may be, in
compliance with any and all applicable federal and state laws,
rules, and regulations, as well as any and all rules or
regulations adopted by the department with respect to the
program and the investment of the fund, including, but not
limited to, the investment policy.
(b) The secretary may require the establishment of any
or all of the following investment options:
(1) A capital preservation fund, which prioritizes the
security of the deposit over the rate of return. If the
capital preservation fund is established, the department may
provide that the first one thousand dollars ($1,000) in
contributions made by, or on behalf of, an enrollee shall be
deposited into the capital preservation fund and the
department may provide for an account revocation period during
which, if the enrollee chooses to end participation in the
program, the enrollee may withdraw the deposited amounts from
the capital preservation fund without penalty or.
(2) a life-cycle fund or.
(3) any other investment option deemed appropriate
by the secretary.
(c) The secretary may designate by rule or
regulation one of the investment options as the default
investment option for enrollees who fail to elect an
investment option and may, from time to time, amend, modify,
or repeal such investment options as it deems necessary or
proper and may subsequently select, by rule or regulation, a
different investment option as the default investment option.
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different investment option as the default investment option.
Section 9. (a) The program shall be implemented, and
the enrollment of employees shall begin, within 24 months
after the effective date of this act. The Secretary of
Workforce may extend the time period within which the program
is implemented and enrollment of employees begins, but not by
more than 12 months. The program shall be implemented in two
phases based on the size of the employers participating, as
measured by the number of employees per employer, with the
program implemented sooner for larger employers. The following
provisions of this section shall be in force after the program
opens for enrollment.
(b) Each employer shall establish a payroll deposit
retirement savings arrangement to allow each employee to
participate in the program not more than nine months after the
program opens for enrollment.
(c) Employers shall automatically enroll in the program
each employee who has not opted out of participation in the
program and shall provide payroll deposit retirement savings
arrangements for participating employees and, on behalf of the
employees, remit payroll deduction contributions to the
program. Eligible employers shall provide payroll deposit
retirement savings arrangements for each employee who elects
to participate in the program.
(d) Enrollees shall have the ability to select a
contribution level into the fund. This level may be expressed
as a percentage of wages or as a dollar amount up to the
deductible amount for the enrollee's taxable year under
Section 219(b)(1)(A) of the Internal Revenue Code. Enrollees
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Section 219(b)(1)(A) of the Internal Revenue Code. Enrollees
may change their contribution level no more than once every
calendar quarter, subject to rules and regulations adopted by
the Secretary and Department of Workforce, as long as the
contributions do not cause the enrollee's total contributions
to IRAs for the year to exceed the deductible amount for the
enrollee's taxable year under Section 219(b)(1)(A) of the
Internal Revenue Code.
(e) Following initial implementation of the program
pursuant to this section, at least once every year,
participating employers shall designate an open enrollment
period during which employees who previously opted out of the
program may enroll in the program.
(f) (1) For any employee hired by an employer more than
six months after the program opens for enrollment, the
employer shall enroll the employee in the program no later
than three months following the date of hire of the employee,
unless the employee opts out of enrollment in the program.
(2) Any newly hired employee who has previously been
enrolled in the program shall have the option of making direct
contributions into that employees existing account, provided
that subdivision paragraph (1) also applies to the employer of
a newly hired employee who has been previously enrolled in the
program.
(g) An employee who opts out of the program who
subsequently wants to participate through the participating
employer's payroll deposit retirement savings arrangement may
only enroll during the participating employer's designated
open enrollment period or if permitted by the participating
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open enrollment period or if permitted by the participating
employer at an earlier time.
(h) An employee may terminate his or her participation
in the program at any time in a manner prescribed by the
secretary.
(i) The department may establish and maintain an
Internet website designed to assist employers in identifying
private sector providers of retirement arrangements that can
be set up by the employer rather than allowing employee
participation in the program under this act. The department
shall provide public notice of the availability of and the
process for inclusion on the Internet website before it
becomes publicly available.
(j) Each employer is responsible for the tasks
described in subsections (b) and (c), but the employer is
permitted to contract with a third party, such as a payroll
service provider or a professional employer organization, to
perform those tasks on behalf of the employer.
Section 10. (a) Participating employers shall not have
any liability for an employee's decision to participate in or
opt out of the program or for the investment decisions of the
department or of any enrollee.
(b) The program is not an employer-sponsored plan and
is not operated or administered by the employer. A
participating employer shall not be a fiduciary, or considered
to be a fiduciary, over the program and shall not be liable
with regard to investment returns, program design, and
benefits paid to the program participants. A participating
employer shall not bear responsibility for the administration,
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employer shall not bear responsibility for the administration,
investment, or investment performance of the program or for
any required or permitted communications between participating
employees and program administrators.
Section 11. (a) If any clause, sentence, paragraph,
section, or other part of this act shall be adjudged by any
court of competent jurisdiction to be invalid, including any
judgment made that the part is unconstitutional, invalid, or
inoperative, the judgment shall not affect, impair, or
invalidate the remainder of this act but shall be confined in
its operation to the clause, sentence, paragraph, section, or
other part directly involved in the controversy in which the
judgment shall have been rendered.
(b) Notwithstanding the provisions of any other law to
the contrary, the value of assets in an individual’s account
under the program shall not be regarded as assets for the
purposes of determining eligibility for benefits or the amount
of benefits to be provided pursuant to any state or federal
law, except that, if the federal law expressly requires that
the assets in the accounts be regarded as assets for those
purposes, the assets may be taken into consideration when
determining eligibility benefits or the amount of benefits.
Provided further that, if the federal law provides discretion
to the state in setting standards regarding the amount of
assets which may be disregarded in determining benefits, or
other factors regarding the assets which impact the
eligibility for, or amount of, benefits, the state shall, with
respect to assets in the assets in the accounts under the
program, set standards which are as favorable as the federal
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program, set standards which are as favorable as the federal
law permits for the individuals with the accounts.
Section 12. This act shall become effective on June 1,
2025.
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