1.1 A bill for an act
1.2 relating to retirement; establishing the Minnesota Secure Choice retirement
1.3 program; proposing coding for new law as Minnesota Statutes, chapter 187.
1.4BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.5 Section 1. [187.01] MINNESOTA SECURE CHOICE RETIREMENT PROGRAM;
1.6CITATION.
1.7 This chapter shall be known as and may be cited as the "Minnesota Secure Choice
1.8Retirement Program Act."
1.9 Sec. 2. [187.02] STATEMENT OF PURPOSE.
1.10 The state of Minnesota creates and establishes a public-private partnership model known
1.11as the "Minnesota Secure Choice retirement program" for privately employed workers to
1.12save for retirement for the following reasons:
1.13 (1) for millions of Americans, including hundreds of thousands of Minnesotans, a secure
1.14retirement is not attainable, with the median retirement account balance being $3,000 for
1.15all working-age households and $12,000 for near-retirement-age households;
1.16 (2) Americans who do not have access to a retirement savings plan through their
1.17workplace are more likely to rely on Social Security as their only source of retirement
1.18income;
1.19 (3) in Minnesota, the average monthly Social Security benefit is $1,600, with nearly 14
1.20percent of seniors relying on Social Security for 90 percent of their income;
1Sec. 2.
REVISOR BD/AD 23-0199301/11/23
State of Minnesota
This Document can be made available
in alternative formats upon request
HOUSE OF REPRESENTATIVES
H. F. No. 782
NINETY-THIRD SESSION
Authored by Becker-Finn, Her, Wolgamott and Nelson, M.,01/25/2023
The bill was read for the first time and referred to the Committee on State and Local Government Finance and Policy 2.1 (4) increased retirement savings can save Minnesota taxpayers an estimated $258,000,000
2.2over a span of ten years in Medicaid savings alone; and
2.3 (5) research has shown that offering workers a way to save through their job increases
2.4their ability to save dramatically and promotes individual responsibility and financial
2.5freedom.
2.6 Sec. 3. [187.03] DEFINITIONS.
2.7 Subdivision 1.Applicability.For purposes of this chapter, the terms defined in this
2.8section have the meanings given them.
2.9 Subd. 2.Board."Board" means the Secure Choice retirement program board of directors.
2.10 Subd. 3.Compensation."Compensation" means compensation within the meaning of
2.11Section 219(f)(1) of the Internal Revenue Code that is received by a covered employee from
2.12a covered employer.
2.13 Subd. 4.Contribution rate."Contribution rate" means the percentage of compensation
2.14withheld from a covered employee's compensation and deposited in an account established
2.15for the covered employee under the program.
2.16 Subd. 5.Covered employee.(a) "Covered employee" means a person who is employed
2.17by a covered employer and who, for the immediately preceding calendar year, was credited
2.18with 500 or more hours of service for the covered employer and whose primary work location
2.19is in Minnesota. Once a person has been credited with 500 or more hours of service in a
2.20calendar year, the person continues to be a covered employee for as long as the person is
2.21employed by a covered employer, even if the person is credited with fewer than 500 hours
2.22of service in the current or subsequent calendar year.
2.23 (b) Covered employee does not include:
2.24 (1) a person who, on December 31 of the preceding calendar year, was younger than 18
2.25years of age;
2.26 (2) a person covered under the federal Railway Labor Act, as amended, United States
2.27Code, title 45, sections 151 et seq.;
2.28 (3) a person on whose behalf an employer makes contributions to a Taft-Hartley
2.29multiemployer pension trust fund; and
2.30 (4) a person employed by the government of the United States, another country, the state
2.31of Minnesota, another state, or any subdivision thereof.
2Sec. 3.
REVISOR BD/AD 23-0199301/11/23 3.1 Subd. 6.Covered employer.(a) "Covered employer" means a person or entity:
3.2 (1) engaged in a business, industry, profession, trade, or other enterprise in Minnesota,
3.3whether for profit or not for profit;
3.4 (2) that employs one or more covered employees or is a sole proprietor; and
3.5 (3) that does not sponsor or contribute to and did not in the immediately preceding
3.6calendar year sponsor or contribute to a retirement savings plan for its employees or, in the
3.7case of a sole proprietorship, for the sole proprietor.
3.8 (b) Covered employer does not include:
3.9 (1) an employer that has not engaged in a business, industry, profession, trade, or other
3.10enterprise in Minnesota, whether for profit or not for profit, at any time during the
3.11immediately preceding calendar year; and
3.12 (2) a state or federal government or any political subdivision thereof.
3.13 Subd. 7.Executive director."Executive director" means the chief executive and
3.14administrative head of the program.
3.15 Subd. 8.Internal Revenue Code."Internal Revenue Code" means the Internal Revenue
3.16Code of 1986, as amended, United States Code, title 26.
3.17 Subd. 9.Program."Program" means the Minnesota Secure Choice retirement program.
3.18 Subd. 10.Retirement savings plan."Retirement savings plan" means a plan or program
3.19offered by an employer that permits contributions to be set aside for retirement on a pre-tax
3.20or after-tax basis and permits all employees of the employer to participate except those
3.21employees who have not satisfied participation eligibility requirements that are no more
3.22restrictive than the eligibility requirements permitted under section 410(b) of the Internal
3.23Revenue Code. Retirement savings plan includes but is not limited to a plan described in
3.24section 401(a) of the Internal Revenue Code, an annuity plan or annuity contract described
3.25in section 403(a) or (b) of the Internal Revenue Code, a plan within the meaning of section
3.26457(b) of the Internal Revenue Code, a simplified employee pension (SEP) plan, a savings
3.27incentive match plan for employees (SIMPLE) plan, a payroll deduction individual retirement
3.28account, and a multiemployer pension plan described in section 414(f) of the Internal
3.29Revenue Code.
3.30 Subd. 11.Secure Choice administrative fund."Secure Choice administrative fund"
3.31or "administrative fund" means the fund established under section 187.06, subdivision 2.
3Sec. 3.
REVISOR BD/AD 23-0199301/11/23 4.1 Subd. 12.Secure Choice trust."Secure Choice trust" means a trust established under
4.2section 187.06, subdivision 1, to hold contributions and investment earnings thereon under
4.3the program.
4.4 Subd. 13.Roth IRA."Roth IRA" means an individual retirement account established
4.5under section 408A of the Internal Revenue Code to hold and invest after-tax assets.
4.6 Subd. 14.Traditional IRA."Traditional IRA" means an individual retirement account
4.7established under section 408 of the Internal Revenue Code to hold and invest pre-tax assets.
4.8 Sec. 4. [187.05] SECURE CHOICE RETIREMENT PROGRAM.
4.9 Subdivision 1.Program established.No later than July 1, 2024, the board must design,
4.10establish, and maintain a payroll deduction arrangement whereby employee payroll deduction
4.11contributions are transmitted on a pre-tax or after-tax basis by covered employers to
4.12individual retirement accounts established under the program. The board must establish
4.13procedures for opening a traditional IRA, a Roth IRA, or both a traditional IRA and a Roth
4.14IRA for each employee whose covered employer transmits employee payroll deduction
4.15contributions under the program. Contributions must be made on a pre-tax basis, unless the
4.16employee elects to contribute on an after-tax basis.
4.17 Subd. 2.Compliance with Internal Revenue Code.Each traditional IRA and Roth
4.18IRA opened under the program must be established and administered in compliance with
4.19section 408 or 408A of the Internal Revenue Code, as applicable, for the benefit of the
4.20employee for whom the account was opened.
4.21 Subd. 3.Contributions held in trust.Employee payroll deduction contributions must
4.22be transmitted by each covered employer to an account established for the benefit of the
4.23employee in a trust established to hold contributions under the program.
4.24 Subd. 4.Contribution rate.The board must establish default, minimum, and maximum
4.25contribution rates and autoescalation requirements whereby each employee's contribution
4.26rate automatically increases from year to year until it reaches a maximum contribution rate,
4.27subject to the employee's election to change the contribution rate or cease contributions.
4.28 Subd. 5.Vesting.Employees must at all times be 100 percent vested in their accounts.
4.29 Subd. 6.Withdrawals and distributions.The board must establish alternatives
4.30permitting employees to take a withdrawal of all or a portion of the employee's account
4.31while employed and one or more distributions following termination of employment,
4.32including the option to elect a direct rollover within the meaning of section 402(c) of the
4.33Internal Revenue Code. Distribution alternatives must include lifetime income options.
4Sec. 4.
REVISOR BD/AD 23-0199301/11/23 5.1 Subd. 7.Individuals not employed by a covered employer.The board may allow
5.2individuals to open and contribute to an account in the program outside of an employment
5.3relationship with a covered employer, in which case the individual shall be considered a
5.4covered employee.
5.5 Sec. 5. [187.06] ESTABLISHMENT OF SECURE CHOICE TRUST AND
5.6ADMINISTRATIVE FUND; EMPLOYEE ACCOUNTS; INVESTMENTS.
5.7 Subdivision 1.Secure Choice trust established.The Secure Choice trust is established
5.8as an instrumentality of the state of Minnesota to hold employee payroll deduction
5.9contributions and earnings thereon. The board must appoint a financial institution to act as
5.10trustee or custodian. Trust assets must be managed and administered for the exclusive
5.11purposes of providing benefits to covered employees and defraying reasonable expenses of
5.12administering the program and managing investments under the program, including the
5.13expenses of the board.
5.14 Subd. 2.Secure Choice administrative fund established.The Secure Choice
5.15administrative fund is established in the state treasury as a fund separate and apart from the
5.16Secure Choice trust. The board must use money in the administrative fund to pay for
5.17administrative expenses it incurs in the performance of its duties under this chapter. The
5.18administrative fund may receive any gifts, grants, donations, loans, appropriations, or other
5.19moneys designated for the administrative fund from the state of Minnesota, any unit of
5.20federal or local government, any other entity, or any person. Any interest or investment
5.21earnings that are attributable to money in the administrative fund must be deposited into
5.22the administrative fund.
5.23 Subd. 3.Individual accounts established.The trustee or custodian, as applicable, must
5.24maintain an account for employee payroll deduction contributions with respect to each
5.25covered employee. Interest, earnings, and losses shall be allocated to accounts as prescribed
5.26by the board.
5.27 Subd. 4.Investments.Each employee or former employee is entitled to direct the
5.28investment of the contributions credited to the employee's account in the trust. The board
5.29must make available for investment a diversified array of investment funds selected by the
5.30State Board of Investment. Members of the board, the executive director of the State Board
5.31of Investment, and all other fiduciaries are relieved of fiduciary responsibility for investment
5.32losses resulting from the employee's investment directions.
5.33 Subd. 5.Default investment fund.The board must designate a default investment fund
5.34that is diversified to minimize the risk of large losses and consists of target date funds, a
5Sec. 5.
REVISOR BD/AD 23-0199301/11/23 6.1balanced fund, or a capital preservation fund. Accounts for which no investment direction
6.2has been given by the employee or former employee must be invested in the default
6.3investment fund. Members of the board, the executive director of the State Board of
6.4Investment, and all other fiduciaries are relieved of fiduciary duty under section 356A.06,
6.5subdivision 10, with regard to investment of assets in the default investment fund.
6.6 Subd. 6.Inalienability of accounts.No account under the program is subject to
6.7assignment or alienation, either voluntarily or involuntarily, or to the claims of creditors.
6.8 Subd. 7.Accounts not property of the state of Minnesota or covered employers.The
6.9assets of the Secure Choice trust shall at all times be preserved, invested, and expended
6.10solely for the purposes of the trust and no property rights therein shall exist in favor of the
6.11state of Minnesota or any covered employer. The assets of the Secure Choice trust shall not
6.12be transferred or used by the state of Minnesota for any purpose other than the purposes of
6.13the trust, including appropriate administrative expenses of the program. Amounts deposited
6.14in the trust shall not constitute property of the state of Minnesota and shall not be commingled
6.15with state funds, and the state of Minnesota shall have no claim to or against, or interest in,
6.16the assets of the Secure Choice trust.
6.17 Sec. 6. [187.07] RESPONSIBILITIES OF COVERED EMPLOYERS.
6.18 Subdivision 1.Requirement to enroll employees.Each covered employer must enroll
6.19its covered employees in the program and withhold payroll deduction contributions from
6.20each covered employee's paycheck, unless the covered employee has elected not to contribute.
6.21 Subd. 2.Remitting contributions.A covered employer must timely remit contributions
6.22as required by the board. The board may establish penalties for employers for failing to
6.23timely remit contributions.
6.24 Subd. 3.Distribution of information.Covered employers must provide information
6.25packets prepared by the board to all covered employees regarding the program. The
6.26information must be provided to each employee no later than the date of the first paycheck
6.27from which employee contributions are deducted for transmittal to the program.
6.28 Subd. 4.No fiduciary responsibility.Except for the responsibilities described in
6.29subdivisions 1 to 3, a covered employer has no obligations to employees and is not a fiduciary
6.30or considered to be a fiduciary regarding the Secure Choice trust or the program. Covered
6.31employers do not bear responsibility for the administration, investment performance, plan
6.32design, or benefits paid to employees or former employees.
6Sec. 6.
REVISOR BD/AD 23-0199301/11/23 7.1 Subd. 5.Employer liability.An employer is not liable to an employee or former
7.2employee for alleged damages resulting from an employee's participation in or failure to
7.3participate in the program.
7.4 Subd. 6.Enforcement.The Minnesota attorney general has the power to enforce the
7.5provisions of this chapter. The attorney general may impose, after due process, monthly or
7.6quarterly penalties as established by the board against any covered employer that fails to
7.7comply with this section. Proceeds of such penalties, after deducting enforcement expenses,
7.8must be deposited in the Secure Choice administrative fund and are appropriated to the
7.9program.
7.10 Sec. 7. [187.08] SECURE CHOICE RETIREMENT PROGRAM BOARD OF
7.11DIRECTORS.
7.12 Subdivision 1.Membership.The policy-making function of the program is vested in a
7.13board of directors consisting of seven members as follows:
7.14 (1) the executive director of the Minnesota State Retirement System or the executive
7.15director's designee;
7.16 (2) the executive director of the State Board of Investment or the executive director's
7.17designee;
7.18 (3) three members chosen by the Legislative Commission on Pensions and Retirement,
7.19one from each of the following experience categories:
7.20 (i) executive or operations manager with substantial experience in record keeping 401(k)
7.21plans;
7.22 (ii) executive or operations manager with substantial experience in individual retirement
7.23accounts; and
7.24 (iii) executive or other professional with substantial experience in retirement plan
7.25investments;
7.26 (4) a human resources or retirement benefits executive from a Fortune 500 company
7.27with substantial experience in administering the company's 401(k) plan, appointed by the
7.28governor; and
7.29 (5) a small business owner or executive appointed by the governor.
7.30 Subd. 2.Appointment.Members appointed by the governor must be appointed as
7.31provided in section 15.0597.
7Sec. 7.
REVISOR BD/AD 23-0199301/11/23 8.1 Subd. 3.Deadline for first appointments and first board meeting.(a) The appointing
8.2authorities must make their first appointments to the board by January 15, 2024.
8.3 (b) The board must hold its first meeting by March 1, 2024.
8.4 Subd. 4.Membership terms.(a) Board members serve for two-year terms, except for
8.5the executive directors of the Minnesota State Retirement System and the State Board of
8.6Investment, who serve indefinitely.
8.7 (b) Board members' terms may be renewed, but no member may serve more than two
8.8consecutive terms.
8.9 Subd. 5.Resignation; removal; vacancies.(a) A board member may resign at any time
8.10by giving written notice to the board.
8.11 (b) A board member may be removed by the appointing authority and a majority vote
8.12of the board following notice and hearing before the board. For purposes of this subdivision,
8.13the chair may invite the appointing authority or a designee of the appointing authority to
8.14serve as a voting member of the board if necessary to constitute a quorum.
8.15 (c) If a vacancy occurs, the Legislative Commission on Pensions and Retirement or the
8.16governor, as applicable, shall appoint a new member within 90 days.
8.17 Subd. 6.Compensation.Public members are compensated and expenses reimbursed as
8.18provided under section 15.0575, subdivision 3.
8.19 Subd. 7.Chair.(a) The Legislative Commission on Pensions and Retirement must
8.20designate one of the members of the board as acting chair for the first meeting.
8.21 (b) The board shall select a chair to replace the acting chair at the first meeting.
8.22 Subd. 8.Duties.In addition to the duties set forth in this chapter, the board has the
8.23following duties, powers, and authority:
8.24 (1) to appoint an executive director, determine the duties of the executive director, and
8.25set the compensation of the executive director;
8.26 (2) to establish secure processes for enrolling employees in the program and for
8.27transmitting employee and employer contributions to custodial accounts or accounts within
8.28a trust;
8.29 (3) to prepare a budget and establish procedures for the payment of costs of administering
8.30and operating the program;
8Sec. 7.
REVISOR BD/AD 23-0199301/11/23 9.1 (4) to lease or otherwise procure office space and equipment necessary to operate the
9.2program;
9.3 (5) to procure insurance in connection with the property of the program and the activities
9.4of the board, executive director, and other staff;
9.5 (6) to accept contributions from employees and from participating employers for the
9.6benefit of their employees in cash or cash equivalents only;
9.7 (7) to keep annual administrative expenses as low as possible, but in no event may they
9.8exceed one percent of the total trust balance, and allocate administrative expenses to each
9.9employee's account on a pro rata basis, or such other basis as the board determines to be
9.10equitable;
9.11 (8) to determine the eligibility of an employer, employee, or other individual to participate
9.12in the program and review and decide claims for benefits and make factual determinations;
9.13 (9) to prepare information regarding the program that is clear and concise for
9.14dissemination to all covered employees and includes the following:
9.15 (i) the benefits and risks associated with participating in the program;
9.16 (ii) procedures for enrolling in the program and opting out of the program, electing a
9.17different or zero percent employee contribution rate, making investment elections, applying
9.18for a distribution of employee accounts, and making a claim for benefits;
9.19 (iii) the federal and state income tax consequences of participating in the program, which
9.20may consist of or include the disclosure statement required to be distributed by retirement
9.21plan trustees or custodians under the Internal Revenue Code and the Treasury Regulations
9.22thereunder;
9.23 (iv) how to obtain additional information on the program; and
9.24 (v) disclaimers of covered employer and state responsibility, including the following
9.25statements:
9.26 (A) covered employees seeking financial, investment, or tax advice should contact their
9.27own advisors;
9.28 (B) neither covered employers nor the state of Minnesota are liable for decisions covered
9.29employees make regarding their account in the program;
9.30 (C) neither a covered employer nor the state of Minnesota guarantee the accounts in the
9.31program or any particular investment rate of return; and
9Sec. 7.
REVISOR BD/AD 23-0199301/11/23 10.1 (D) neither a covered employer nor the state of Minnesota monitors or has an obligation
10.2to monitor any covered employee's eligibility under the Internal Revenue Code to make
10.3contributions to an account in the program, or whether the covered employee's contributions
10.4to an account in the program exceed the maximum permissible contribution under the
10.5Internal Revenue Code;
10.6 (10) to publish an annual audited financial report, prepared according to generally
10.7accepted accounting principles, on the operations of the program and audited by an
10.8independent certified public accountant, which shall include but not be limited to direct and
10.9indirect costs attributable to the use of outside consultants, independent contractors, and
10.10other persons who are not state employees. The report shall be provided to the chairs and
10.11ranking minority members of the legislative committees with jurisdiction over jobs and
10.12economic development and state government finance, the executive directors of the State
10.13Board of Investment and the Legislative Commission on Pensions and Retirement, and the
10.14Legislative Reference Library;
10.15 (11) to publish an annual report regarding plan outcomes, progress toward savings goals
10.16established by the board, statistics on covered employees and participating employers, plan
10.17expenses, estimated impact of the program on social safety net programs, and penalties and
10.18violations. The report shall be provided to the chairs and ranking minority members of the
10.19legislative committees with jurisdiction over jobs and economic development and state
10.20government finance, the executive directors of the State Board of Investment and the
10.21Legislative Commission on Pensions and Retirement, and the Legislative Reference Library;
10.22 (12) to adopt rules to implement the program;
10.23 (13) to properly file all reports required under the Internal Revenue Code for the program;
10.24 (14) to, at the board's discretion, seek and accept gifts, grants, and donations to be used
10.25for the program, unless such gifts, grants, or donations would result in a conflict of interest
10.26relating to the solicitation of service provider for program administration, and deposit such
10.27gifts, grants, or donations in the Secure Choice administrative fund;
10.28 (15) to, at the board's discretion, seek and accept appropriations from the state of
10.29Minnesota or loans from the state or any agency of the state;
10.30 (16) to assess the feasibility of multi-state or regional agreements to administer the
10.31program through shared administrative resources and, if determined beneficial, enter into
10.32contracts, agreements, memoranda of understanding, or other arrangements with any other
10.33state or an agency or subdivision of any other state to administer, operate, or manage any
10Sec. 7.
REVISOR BD/AD 23-0199301/11/23 11.1part of the program, which may include combining resources, investments, or administrative
11.2functions;
11.3 (17) to hire, retain, and terminate third-party service providers as the board deems
11.4necessary or desirable for the program, including but not limited to the trustees, consultants,
11.5investment managers or advisors, custodians, insurance companies, recordkeepers,
11.6administrators, consultants, actuaries, legal counsel, auditors, and other professionals,
11.7provided that each service provider is authorized to do business in the state of Minnesota;
11.8and
11.9 (18) to interpret the program's governing documents and this chapter and make all other
11.10decisions necessary to administer the program.
11.11 Subd. 9.Conflict of interest; economic interest statement.No member of the board
11.12may participate in deliberations or vote on any matter before the board that will or is likely
11.13to result in direct, measurable economic gain to the member or the member's family. Members
11.14of the board shall file with the Campaign Finance and Public Disclosure Board an economic
11.15interest statement in a manner as prescribed by section 10A.09, subdivisions 5 and 6.
11.16Sec. 8. [187.09] FIDUCIARY DUTY; STANDARD OF CARE.
11.17 The members of the board, the executive director of the program, the members of the
11.18State Board of Investment and its executive director, and any person who controls the
11.19disposition or investment of any assets of the Secure Choice trust:
11.20 (1) are fiduciaries subject to chapter 356A and must undertake their activities as
11.21fiduciaries consistent with chapter 356A; and
11.22 (2) are indemnified and held harmless by the state of Minnesota for the reasonable costs,
11.23expenses, or liability incurred as a result of any actual or threatened litigation or
11.24administrative proceeding arising out of the performance of the person's duties.
11.25Sec. 9. [187.10] NO STATE LIABILITY.
11.26 The state of Minnesota has no liability for the payment of, the amount of, or losses to
11.27any benefit to any participant in the program.
11.28Sec. 10. [187.11] OTHER STATE AGENCIES TO PROVIDE ASSISTANCE.
11.29 (a) The board may enter into intergovernmental agreements with the commissioner of
11.30revenue, the commissioner of labor and industry, and any other state agency that the board
11.31deems necessary or appropriate to provide outreach, technical assistance, or compliance
11Sec. 10.
REVISOR BD/AD 23-0199301/11/23 12.1services. Any agency that enters into an intergovernmental agreement with the board pursuant
12.2to this section must collaborate and cooperate with the board to provide the outreach,
12.3technical assistance, or compliance services under any such agreement.
12.4 (b) The commissioner of revenue, the commissioner of labor and industry, and any other
12.5state agency must provide information and data on employees, employers, and corporations
12.6doing business in the state of Minnesota, upon the request of the board or executive director.
12.7The state agency providing the information or data may require that the board or executive
12.8director comply with confidentiality requirements as a condition to providing such
12.9information or data.
12.10Sec. 11. [187.12] SEVERABILITY.
12.11 If any provision of this chapter is found to be unconstitutional and void, the remaining
12.12provisions of this chapter are valid.
12.13Sec. 12. EFFECTIVE DATE.
12.14 Sections 1 to 5 and 7 to 11 are effective the day following final enactment. Section 6 is
12.15effective the day after the Secure Choice retirement program board of directors opens the
12.16Secure Choice retirement savings program for enrollment of covered employees.
12Sec. 12.
REVISOR BD/AD 23-0199301/11/23