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HOUSE BILL 166
56
TH LEGISLATURE
-
STATE
OF
NEW
MEXICO
-
FIRST SESSION
,
2023
INTRODUCED BY
Tara L. Lujan and Bill Tallman
AN ACT
RELATING TO PRIVATE SECTOR RETIREMENT; ALIGNING PROVISIONS OF
THE NEW MEXICO WORK AND SAVE ACT TO ENABLE THE FORMATION OF AN
AUTO-IRA PARTNERSHIP WITH ONE OR MORE OTHER STATES; CLARIFYING
CERTAIN DEFINITIONS IN THE NEW MEXICO WORK AND SAVE ACT;
REQUIRING CERTAIN EMPLOYERS TO REGISTER AS PARTICIPATING
EMPLOYERS AND TO AUTOMATICALLY ENROLL THEIR EMPLOYEES IN THE
NEW MEXICO WORK AND SAVE IRA PROGRAM; ALLOWING EMPLOYEES TO OPT
OUT OF AUTOMATIC ENROLLMENT; MAKING AN APPROPRIATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 58-33-2 NMSA 1978 (being Laws 2020,
Chapter 7, Section 2, as amended) is amended to read:
"58-33-2. DEFINITIONS.--As used in the New Mexico Work
and Save Act:
A. "board" means the New Mexico work and save
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board;
B. "board member" means a member of the board;
C. "covered employee" means a person who is at
least eighteen years of age, [and who ] earns taxable income
pursuant to the Income Tax Act and for at least one hundred
eighty days is employed by a covered employer, either full time
or part time, or a person who is self-employed as a sole
proprietor or an independent contractor; provided that "covered
employee" does not include an employee:
(1) covered under the federal Railway Labor
Act;
(2) on whose behalf an employer makes
contributions to a multi-employer pension trust fund pursuant
to the federal Taft-Hartley Act; or
(3) of federal, state or local governments or
any agency, department, board, commission, institution or
instrumentality of those governments;
D. "covered employer" means a person engaged in a
business, industry, profession, trade, nonprofit or other
enterprise with its primary place of business physically
located in New Mexico that employed five or more employees at
any time during the previous calendar year, has operated for at
least twelve consecutive months and, in the proceeding two
calendar years, has not offered all of its employees a
qualified retirement plan pursuant to the Internal Revenue
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Code, including a plan qualified under Section 401(a), 401(k),
403(a), 403(b), 408(k), 408(p) or 457(b) of the Internal
Revenue Code, but does not include a federal, state or local
government or any agency, department, board, commission,
institution or instrumentality of those governments;
E. "default investment option" means a Roth
individual retirement account with a target date fund
investment and a default contribution rate established by the
board;
F. "financial institution" means a duly licensed
bank, savings and loan association, credit union, broker-
dealer, asset manager, insurance company, mutual fund or other
financial entity;
G. "financial service provider" means a financial
or investment service provider that, if approved by the board
as meeting the eligibility criteria, may administer and
maintain one or more program participant investment accounts or
one or more marketplace participant accounts for which the
provider is a fiduciary;
H. "Internal Revenue Code" means the United States
Internal Revenue Code of 1986, as amended;
I. "IRA" means an individual retirement account
that conforms to the requirements of Section [408(a) ] 408A of
the Internal Revenue Code;
J. "marketplace participant" means a covered
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employer that establishes a plan through the New Mexico
retirement plan marketplace or a covered employee who
establishes an investment account through the New Mexico
retirement plan marketplace;
K. "New Mexico retirement plan marketplace" means a
board-approved web-based marketplace that facilitates access to
retirement savings plans for private sector and nonprofit
employers and employees, including multiple-employer plans;
L. "New Mexico work and save IRA program" means the
retirement savings program, designed and implemented by the
board, that facilitates payroll deductions of program
participants in individual retirement accounts without any
contributions from covered employers;
M. "New Mexico work and save platform" means the
online digital service designed and implemented by the board to
facilitate interaction among covered employers, covered
employees, program participants, financial service providers
and other users via the internet;
N. "participating employer" means a covered
employer that provides payroll deductions for individual
retirement accounts through the New Mexico work and save IRA
program but that does not contribute to those accounts;
O. "program participant" means a covered employee
who is contributing to an individual retirement account through
the New Mexico work and save IRA program or has an individual
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retirement account balance through the New Mexico work and save
IRA program;
P. "Roth individual retirement account" means a
voluntary payroll deduction Roth individual retirement account
that conforms to the requirements of Section 408A of the
Internal Revenue Code; [and ]
Q. "total fees and expenses" means all fees, costs
and expenses, including administrative expenses, investment
expenses of the New Mexico work and save IRA program,
investment advice expenses, accounting costs, actuarial costs,
legal costs, marketing expenses, education expenses, trading
costs, insurance annuitization costs and other operating
expenses; and
R. "wages" means compensation, as provided in
Section 219(f)(1) of the Internal Revenue Code, that is
received by an employee during a calendar year ."
SECTION 2. Section 58-33-9 NMSA 1978 (being Laws 2020,
Chapter 7, Section 9, as amended) is amended to read:
"58-33-9. NEW MEXICO WORK AND SAVE IRA PROGRAM--CREATED--
IMPLEMENTATION.--
A. The New Mexico work and save IRA program
developed by the board under the New Mexico Work and Save Act
shall:
(1) facilitate the establishment of individual
retirement accounts for program participants that are
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administered and managed by board-approved financial service
providers;
(2) provide that a covered employer [may
voluntarily choose to participate ] that on or after July 1,
2023 is not a marketplace participant or does not offer all its
employees a qualified plan pursuant to the Internal Revenue
Code, including a plan qualified under Section 401(a), 401(k),
403(a), 403(b), 408(k), 408(p) or 457(b) of the Internal
Revenue Code, shall register and become a participating
employer in the New Mexico work and save IRA program;
(3) provide that a participating employer
[may] shall automatically enroll its employees but shall allow
its employees to opt out;
(4) allow covered employees to voluntarily
contribute to an individual retirement account through
automatic payroll deductions, if allowed pursuant to federal
law;
(5) provide that the default investment option
for program participants shall be a Roth individual retirement
account with a target date fund investment and a default
contribution rate established by the board by rule; provided
that the board may establish a principal protection fund for
initial savings up to an amount established by the board; and
provided that a program participant may choose to stop
participating altogether, choose a different investment from
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among the options available or choose to contribute at a higher
or lower contribution rate, subject to the Roth individual
retirement account contribution dollar limits applicable under
the Internal Revenue Code;
(6) offer default escalation of contribution
rates that can be increased or decreased by program
participants within the limits allowed by the Internal Revenue
Code;
(7) provide for direct deposit of
contributions into one or more investments approved by the
board;
(8) be professionally managed;
(9) not allow employer contributions by
[covered] participating employers;
(10) ensure that each board-approved financial
service provider submits a report on the status of each program
participant's account to each program participant at least
annually and provides annual reports to the board regarding the
number of program participant accounts maintained by the
financial service provider and the overall value of those
accounts;
(11) when practicable, use existing employer
and public infrastructure to facilitate contributions,
recordkeeping and outreach and use pooled or collective
investment arrangements;
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(12) provide that each program participant
owns the contributions to and earnings on amounts contributed
to the participant's account under the New Mexico work and save
IRA program and that the state, the board and [covered ]
participating employers have no proprietary interest, whether
legal or equitable, in those contributions or earnings;
(13) not impose any duties on employers
pursuant to the federal Employee Retirement Income Security Act
of 1974; and
(14) [keep] prescribe by rule reasonable total
fees and expenses [below one percent of the funds invested by a
program participant in the New Mexico work and save IRA
program] allowed pursuant to the New Mexico Work and Save Act.
The board shall review such rules at least annually or as
necessary to ensure reasonable total fees and expenses are
maintained.
B. The board shall ensure that the New Mexico work
and save IRA program is financially self-sustaining no later
than five years after the date that it is fully implemented.
C. If a [covered] participating employer knowingly
or intentionally fails to transmit a payroll deduction
contribution to the New Mexico work and save IRA program on the
earliest date the amount withheld from the covered employee's
compensation can reasonably be segregated from the [covered ]
participating employer's assets, but not later than the
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fifteenth day of the month following the month in which the
covered employee's contribution amounts are withheld from the
covered employee's paycheck, the failure to remit those
contributions on a timely basis shall be subject to the same
sanctions as employer misappropriation of employee wage
withholdings."
SECTION 3. Section 58-33-10 NMSA 1978 (being Laws 2020,
Chapter 7, Section 10, as amended) is amended to read:
"58-33-10. POLICIES AND PROCEDURES FOR THE NEW MEXICO
WORK AND SAVE IRA PROGRAM.--The board shall promulgate rules to
implement the New Mexico work and save IRA program that:
A. establish the processes by which a covered
employer [may choose to voluntarily enroll ] registers in the
New Mexico work and save IRA program [and become ] as a
participating employer;
B. establish the processes for program participants
to enroll in and contribute to New Mexico work and save IRA
program payroll deduction individual retirement accounts,
including elections by covered employees, withholding by
participating employers of program participants' payroll
deduction contributions from wages and remittance for deposit
to the program participants' individual retirement accounts and
voluntary enrollment and contributions by self-employed
persons;
C. establish the processes for withdrawals,
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rollovers, conversions and direct transfers from individual
retirement accounts in the interest of facilitating portability
and maximization of benefits;
D. establish processes governing the distribution
of funds from the New Mexico work and save IRA program; and
E. require education of and outreach to covered
employers, covered employees and the public regarding the
New Mexico work and save IRA program. The rules shall specify
the content, frequency, timing and means of required
disclosures from the New Mexico work and save IRA program to
covered employees, covered employers, program participants and
participating employers and other interested parties. These
disclosures shall include:
(1) the benefits associated with tax-favored
retirement saving;
(2) the potential advantages and disadvantages
associated with contributing to individual retirement accounts
through the New Mexico work and save IRA program;
(3) the eligibility rules for individual
retirement accounts;
(4) that the program participant is solely
responsible for determining whether and, if so, how much the
program participant is eligible to contribute on a tax-favored
basis to an individual retirement account;
(5) the penalty for excess contributions to
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individual retirement accounts and the method of correcting
excess contributions;
(6) instructions for enrolling, making
elections to contribute or to decline to contribute and making
elections regarding contribution rates, types of individual
retirement accounts and investments;
(7) instructions for implementing and for
changing the elections;
(8) the potential availability of a program
participant's tax credit, including the eligibility conditions
for the credit and instructions on how to claim it;
(9) statements that the New Mexico work and
save IRA program, the board, board members or board employees,
a covered employer or the state does not offer tax, investment
or other financial advice, and that the program participant
should contact appropriate professional advisors, and that only
the program participant is liable for decisions the program
participant makes in relation to the New Mexico work and save
IRA program;
(10) statements that payroll deduction
individual retirement accounts are not intended to be employer-
sponsored retirement plans and that the New Mexico work and
save IRA program is not an employer-sponsored retirement plan;
(11) the potential implications of account
balances in the New Mexico work and save IRA program for the
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application of asset limits under certain public assistance
programs;
(12) that the program participant is solely
responsible for investment performance, including market gains
and losses, and that individual retirement accounts and rates
of return are not guaranteed by the New Mexico work and save
IRA program, the board, individual board members, board
employees, covered employers or the state or any of its
officers or employees;
(13) additional information and tools designed
to promote financial literacy and capability, which may take
the form of links to or explanations of how to obtain such
information; and
(14) how to obtain additional information
about the New Mexico work and save IRA program."
SECTION 4. Section 58-33-11 NMSA 1978 (being Laws 2020,
Chapter 7, Section 11, as amended) is amended to read:
"58-33-11. PROTECTION FOR [COVERED ] PARTICIPATING
EMPLOYERS.--
A. The New Mexico work and save IRA program is not
an employer-sponsored plan. A [covered ] participating employer
does not bear responsibility for:
(1) the decision by a covered employee to
participate or not to participate in the New Mexico work and
save IRA program;
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(2) the performance of a specific savings
option selection made by a program participant and facilitated
through the New Mexico work and save IRA program;
(3) investment decisions made by a program
participant;
(4) the administration, investment, investment
returns or investment performance of an IRA savings option
facilitated through the New Mexico work and save IRA program,
including interest rate or other rate of return on a
contribution or individual retirement account balance;
(5) the design or administration of the New
Mexico work and save IRA program or the benefits paid to or the
earnings or losses of program participants;
(6) a program participant's awareness of or
compliance with the conditions and other provisions of the tax
laws that determine which persons are eligible to make tax-
favored contributions to individual retirement accounts, in
what amount and in what time frame and manner; or
(7) loss, failure to realize gain or other
adverse consequences, including adverse tax consequences or
loss of favorable tax treatment, public assistance or other
benefits incurred by a program participant as a result of
participating in the New Mexico work and save IRA program.
B. No [covered] participating employer shall be or
shall be considered to be a fiduciary under the New Mexico work
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and save IRA program."
SECTION 5. APPROPRIATION.--Two hundred fifty thousand
dollars ($250,000) is appropriated from the general fund to the
office of the state treasurer for expenditure in fiscal year
2024 to fund two additional full-time-equivalent positions to
administer the provisions of the New Mexico Work and Save Act.
Any unexpended or unencumbered balance remaining at the end of
fiscal year 2024 shall revert to the general fund.
SECTION 6. EFFECTIVE DATE.--The effective date of the
provisions of this act is July 1, 2023.
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