State-based retirement plans for the private sector
States around the country are looking into ways of using the efficiencies of public retirement systems to administer new types of pension plans for private-sector workers. Below are brief summaries of plans that have either passed or are being considered. States whose names are highlighed below have introduced or enacted legislation to provide retirement plans for private-sector workers.
Alabama | Alaska | Arizona |Arkansas | California | Colorado | Connecticut | Delaware | Florida | Georgia | Hawaii | Idaho | Illinois | Indiana | Iowa | Kansas | Kentucky | Louisiana | Maine | Maryland | Massachusetts | Michigan | Minnesota | Mississippi | Missouri | Montana | Nebraska | Nevada | New Hampshire | New Jersey | New Mexico | New York | North Carolina | North Dakota | Ohio | Oklahoma | Oregon | Pennsylvania | Rhode Island | South Carolina | South Dakota | Tennessee | Texas | Utah | Vermont | Virginia | Washington | West Virginia | Wisconsin | Wyoming
In addition to the below summaries, AARP’s Public Policy Institute has established a State Retirement Savings Resource Center, a library of policy papers, key facts, opinion pieces, and studies related to state-based plans for private-sector workers. The Pension Rights Center authored two papers -- one on consumer protections in such plans and one on the advantages of pooled accounts.
In September 2015, the Government Accountability Office published a report, Federal Action Could Help State Efforts to Expand Private Sector Coverage, which looks at coverage rates, efforts by states and other countries to expand coverage, and the obstacles states face in implementing new state-based plans.
On January 22, 2014, Rep. Martin Quezada introduced HB 2063, the Arizona Secure Choice Retirement Savings Program, a mandatory system of payroll deposit individual retirement savings arrangements (IRAs) for private employers in Arizona that have five or more employees and that do not offer other retirement plans to their workers. The bill was assigned to the House Appropriations and Rules Committees, and no further action was taken in the 2013-2014 legislative session.
On September 28, 2012, Governor Jerry Brown signed into law S.B. 1234, the California Secure Choice Retirement Savings Trust Act. The bill, which was sponsored by Senator Kevin de Leόn, will eventually require that all businesses with five or more employees that do not already offer a retirement plan enroll their workers in a new type of savings plan based on IRAs. Before this can occur, a number of steps need to be taken, including passage by the California legislature of subsequent implementing legislation.
To date, the State has established the California Secure Choice Retirement Savings Investment Board and the California Secure Choice Retirement Savings Trust, as required by the statute. The Board has been meeting monthly since 2013, collected information on retirement issues, and reviewed market and legal analyses of the program. On March 28, 2016, the Board voted unanimously to recommend approval of the Program, and sent letters to state leaders outlining the Board’s recommendations for legislation implementing the Secure Choice Program. The Board’s recommendations for inclusion in the legislation include:
- Establishing managed accounts that would be invested in U.S. Treasuries or similarly safe investments within the first three years of the program, with the expectation that during that period the Board would begin to develop investment options that address risk-sharing and smoothing of market losses and gains. Options could include, but not be limited to, custom pooled, professionally managed funds that minimize management costs and feels, the creation of a reserve fund, or the establishment of investment products
- Providing for the Board to conduct an annual peer review to compare California Security Choice funds with similar funds on performance and fees.
- Requiring the Board to seek to minimize participant fees
- Requiring the Board to establish an initial automatic contribution rate of between 2% and 5% of salary
- Allowing the Board to implement automatic escalation of participant’s contribution rates up to 10% of salary, with the option for participants to stop automatic escalation and change their contribution rates.
- Establishing a fiduciary duty in the Board and its contracted administrators and consultants toward the participants of the program.
- Permitting the inclusion of quasi-public and quasi-private workers to be enrolled if found legally permissible
- Requiring communication and education on the Program, including the inherent risks of its investment strategies, making clear that the state does not have liability for the investment performance or payment of benefits to participants
- Directing that a default payout method to retirees be determined
- Clearly defining the ‘ministerial duties’ expected of employers in the implementation of the program, and limiting liability for all employers if an employer inadvertently provides more than ministerial duties.
- Fully determining all necessary costs for administration of the program and ensuring all investment options are appropriately considered by the Board.
- Making determinations on how to structure the Program to ensure the state is prohibited from incurring liabilities associated with administering the Program.
In February, 2016, Senator Kevin de Leon introduced SB 1234, a bill to legislatively enact the California Secure Choice Retirement Savings Trust Act, the final step required by the original legislation before the Program can be implemented. The bill was referred to the Senate Committee on Public Employment and Retirement where a hearing was held on April 12, 2016 and the legislation passed the Committee. SB 1234 was subsequently referred to the Senate Standing Committee on Appropriations where, on May 27, 2016, the bill was approved by a vote of 5-2. The bill was subsequently sent to the Senate Floor, where on May 31st it was read a second time and amended, and ordered to third reading. On June 2, 2016, the bill passed the Senate by a vote of 25-13 and was sent to the Assembly, where it was read a first time and held at the Desk.
As currently drafted, SB 1234 requires all employers within California with five or more employees who do not offer their employees another retirement savings option to participate in the California Secure Choice Retirement Program. The requirement is phased-in over a three-year period based on the employer’s size. Employees will be automatically enrolled in the program, with the opportunity to opt-out. If an employee does not select a contribution amount, 3 percent of salary will be contributed to their Secure Choice account. The Board has the authority to change the default contribution from 2 percent of salary to 5 percent. Employee contributions will be subject to automatic escalation of up to 8 percent of salary, with no more than 1 percent of salary increases per year. Employees have the opportunity to opt-out of automatic escalation and to select their own escalation percentage.
Employers will be allowed to make contributions to the accounts on behalf of their employees but only if these contributions are permitted by the Internal Revenue Code and do not subject the Secure Choice Program to the Employee Retirement Income Security Act. The Board is to evaluate and establish a process by which an employee of a non-participating employer might participate in the Program.
For up to the first three years of the Program, contributions will be invested in United States Treasury bonds or similarly safe investments. During this time, the Board will develop other options that appropriately balance risk and shall strive to minimize participant fees. During start-up and for the first year of operation, administrative funds will be appropriated from the state’s General Fund. These amounts are to be repaid, with interest, and subsequent costs will be paid from the Program’s administrative account. Administrative expenditures for the program are limited to 1 percent of the program fund. The remaining provisions of the legislation closely track the recommendations of the Secure Choice Board.
If enacted, the California Security Choice Retirement Program would go into effect on January 1, 2017.
On February 19, 2015, HB 1235 was introduced by Representatives Brittany Pettersen and John Buckner, and State Senators Pat Steadman and Nancy Todd. The bill would establish the Colorado Retirement Security Task Force to research, assess, and report on the factors that affect the retirement security of the citizens of Colorado. The Task Force would also make recommendations on the feasibility of creating a retirement savings plan for private-sector employees who do not otherwise have a retirement plan available through their employers.
The bill was assigned to the House Committee on Business Affairs and Labor, and, on March 24, 2015, it was amended and referred to the Appropriations Committee. This committee reported the bill to the House in April, where it was passed on April 20, 2015. The bill was introduced in the Colorado Senate on April 24 and assigned to the State, Veterans and Military Affairs Committee. On April 29, 2015, the Senate Committee recommended no further action be taken.
On June 2, 2015, Governor Dannel Malloy signed into law Connecticut’s budget implementer bill for 2016, a bill which incorporated Public Act 16-29, an act creating the Connecticut Retirement Security Exchange. Public Act 16-29 was originally House Substitute Bill 5591, which passed the Connecticut House on April 26, 2016 by a vote of 76-63, and passed the Senate on April 30, 2016 by a tie vote of 18-18 when the tie was broken by the vote of Lieutenant Governor Nancy Wyman. The original bill had been sent to the Governor on May 13, 2016 and was subsequently incorporated into the budget implementer legislation.
The Connecticut Retirement Security Exchange requires covered employers to automatically enroll their employees into a Roth-IRA arrangement. Covered employers are private employers with five or more employees who received at least $5000 in wages during the previous year, who have been in business for at least one year and who do not offer a qualified retirement plan. Employers with fewer than five employees may participate in the Program voluntarily but their employees are not required to enroll in the Exchange.
Beginning on January 1, 2017, employees working for covered employers are required to be auto-enrolled into the new Exchange, which will meet the federal requirements for a Roth IRA. Eligible employees must have worked for the covered employer for 120 days, be over age 19, and not be members of an exempt category. Employees may contribute up to the federal limits for a Roth IRA. Employees who do not wish to participate in the Exchange may select a contribution amount of zero, and those who do not select a contribution amount will have a default amount of three percent of their salary contributed to their accounts. No employer contributions into the accounts are permitted.
Employees can select among a range of age-appropriate target funds for their contributions, and the funds will be offered by a variety of vendors. Employee contributions must be deposited within ten days of the payroll date in which the contributions are deducted. Once employees reach Normal Retirement Age, one-half of their account balances will be transferred to a lifetime income investment.
The Exchange will be administered by the Connecticut Retirement Security Authority, which is directed by a Board made up of 15 members appointed to six year terms. Board appointments are to be made by January 1, 2017. Board members must act in the sole interest of participants and beneficiaries, and for the exclusive purpose of providing benefits and paying administrative expenses. They may not vote on issues in which they have a direct financial interest. The Board may require vendors to meet the same criteria to the extent reasonable and practicable.
Vendors participating in the Program may include federally regulated retirement sponsors, including investment companies, insurance companies and others. Vendors may not include individual brokers, financial planners or agents.
The Board will establish criteria and procedures for approving vendors to participate in the Exchange, and is required to establish a cap on annual fees that can be charged by the vendors. After the fourth year of the program, fees will be capped at three-quarters of a percent of the investment amount. The Board also has the authority to make any modifications to the Exchange required to maintain federal tax deductibility and to avoid application of the Employee Retirement Income Security Act (ERISA). The Board is authorized to establish procedures for providing investment and plan information to participants and beneficiaries and to establish a process for receiving complaints. The Board shall establish and operate a website for approved vendors.
The Board shall also conduct a study of the interest in establishing a non-Roth IRA investment option, and may conduct a study of the feasibility of offering a multi-employer or 401k plan or other tax-deferred vehicle.
On December 3, 2014, the Illinois General Assembly passed SB 2758, an Act creating the Illinois Secure Choice Savings Program, which was introduced by Senator Daniel Biss. The bill was signed into law by Governor Pat Quinn on January 4, 2015. Read our summary of the law.
The Illinois Secure Choice Savings Board held meetings in August, November and December 2015 and its Investment Subcommittee held a meeting on December 9, 2015. The Office of the State Treasurer issued requests for proposals for an External Investment Advisor and for an ERISA Counsel in the fall of 2015. Meetings of the Board are expected to continue in 2016.
SB 2758 establishes a payroll-deduction IRA for workers whose employers do not offer any other retirement savings vehicle. The bill requires all businesses in existence for at least two years with 25 or more employees to automatically enroll their employees in the Secure Choice Savings Program unless they offer another retirement option to their workers.
Employees can determine a contribution level and select among a small number of investment options. A default contribution level of three percent of salary is offered to those who do not select one on their own, as is a default life-cycle investment fund for those who do not choose one from the options offered. Assets are pooled into a single fund and managed by the Illinois Treasurer and a qualified board, providing participants the benefit of low fees and competitive investment performance.Employees can choose to opt out of the program at any time.
The law is to be implemented within 24 months unless enough funds are not made available for the project. The Board must also find that the program is self-sustaining, that it is eligible for favorable federal tax treatment, and that it is not subject to the Employee Retirement Income Security Act of 1974 (ERISA).
On January 13, 2015, HB 1279 was introduced by Representative Matthew Lehman and a companion bill, SB 555 was introduced by Senator Greg Walker into the Senate on January 20, 2015. The bills would create the Hoosier Employee Retirement Option (HERO) plan, which are portable IRAs for employees who do not have access to a retirement plan through their employers. Employers with at least one employee and self-employed individuals would be eligible to participate, and participation by either the employer or the employees would be voluntary. Contributions to the accounts would be in post-tax dollars, and contribution amounts would be selected by the employee. If no selection is made, the default contribution rate is set at 3 percent of salary. Employers are not permitted to make any contributions into the accounts, including matching contributions.
The legislation would establish a board to design and implement the HERO program. The board is required to include at least one target-date fund and seven other diversified investment funds as investment options, and to establish a default fund if the employee fails to make a choice. Investment options must also include low-fee funds. Neither the state nor employers are liable for any investment performance.
The House bill was referred to the House Employment, Labor and Pensions Committee, and the Senate bill to the Committee on Pensions and Labor. No action has been taken on either bill.
On February 16, 2016, SSB 3164 was introduced into the Iowa Senate by State Treasurer Michael Fitzgerald, and a companion bill, HF 2417, was introduced into the House on February 16, 2016 by Representative Bruce Hunter (D-34) and others. This bill creates the Iowa Retirement Savings Plan Trust under the Office of Treasurer of State for the purpose of helping Iowans save for retirement. The bill provides that the trust be operated so that, for federal tax purposes, it meets the requirements of a retirement plan as provided by the Internal Revenue Code. The state treasurer is the trustee of the trust and has numerous powers, as specified in the bill, for the purpose of carrying out the purpose of the trust, including entering into agreements with trust participants and employers, investing moneys in the trust, and entering into any agreements or contracts necessary to carry out the purposes of the trust. The bill provides that the state, the treasurer of state, and the trust may not guarantee any rate of return on any contributions to the trust and are not liable for any loss incurred by any person as a result of participating in the trust. The bill requires the treasurer to submit an annual audited financial report on the operations of the trust. The bill provides an appropriation to the treasurer of state for FY 2016-2017 for the purposes of establishing and managing the Iowa retirement savings plan trust.
The bill provides that when the requirements of the bill are enacted, the treasurer shall not allow individuals to make contributions to the trust earlier than July 1, 2018. The bill provides that the it will go into effect no earlier than July 1, 2017, and only on the date the treasurer of state notifies the Code editor, in writing, that no less than $1.5 million has been appropriated to the treasurer of state for the purpose of the bill and that establishing an Iowa retirement savings plan trust is feasible, and applicable federal requirements make establishing the trust favorable for Iowans contributing to the trust.
SSB 3164 was referred to a Senate Ways and Means Subcommittee chaired by Senator Janet Petersen (D-18) on February 22, 2016 and a meeting was held on the bill on February 29, 2016. HF 2417 was referred to the House Commerce Committee and no further action has been taken.
On February 3, 2015, HR 261 was introduced by a bi-partisan group of state legislators. The bill would establish the Kentucky Retirement Account Program, a state-sponsored retirement program for private sector workers. Employers with five or more employees would be required to participate, unless they receive a hardship exemption. Employers with fewer employees are allowed to participate on a voluntary basis.
The bill would create a governing board to design and implement the program, which would be established as an automatic enrollment payroll deduction Roth IRA program. The board would be required to implement the program within 24 months of enactment, unless insufficient funds are made available. The bill permits the board to seek an opinion as to the applicability and impact of ERISA.
On February 9, 2015, the bill was referred to the Agriculture and Small Business Committee, which held a hearing on the bill on February 25. No further action was taken on the bill prior to the end of the legislative session.
On March 10, 2014, SB 283 was introduced into the 2014 regular legislative session by Senator Troy E. Brown. The bill was referred to the Committee on Retirement, where it was considered on April 28, 2014. No further action has been taken.
The bill would establish the Louisiana Retirement Savings Plan, a state-sponsored retirement plan for private-sector workers who do not have access to a retirement plan through their employers. Churches and new businesses are permitted to participate on a voluntary basis.
The plan would be established as an automatic payroll-deduction IRA, though employees could opt out at any time. The plan provides for an automatic contribution rate of 3 percent of salary and permits employer contributions up to a maximum of $5,000 per year per employee. Assets would be pooled and professionally managed. Benefits would be payable in the form of an annuity, and would become available at the earliest at age 69 and the latest at age 72. Neither the state nor employers are liable for investment performance.
On March 5, 2015, LD 768 was introduced by Representative Diane Russell. This bill is modeled after California’s legislation and would create the Maine Secure Choice Retirement Savings Investment Board, which would administer the Maine Secure Choice Retirement Savings Program. The program would be a state-sponsored payroll-deduction IRA for workers who do not have access to a retirement plan through their employers. Employers with five or more employees are required to participate.
Employees could select their contribution rate into the accounts, though a three percent of salary contribution would be set for those who do not select their own rate. Employees could opt-out at any time.
Assets would be pooled and professionally managed, and a minimum rate of return would be guaranteed through private insurance. Neither the state nor employers would be subject to any liability for fund performance. The program would only be established if the Board finds that it will be self-sustaining, qualifies for favorable federal tax treatment, and is not subject to ERISA.
On March 9, 2015, the bill was referred to the Committee on Labor, Commerce, Research and Economic Development, where it was voted “ought not to pass” on April 14, 2015.
LD 1473 was introduced by Representative Diane Russell on April 30, 2013. It is also modeled after California’s SB 1234 and was not voted out of the House Appropriations and Financial Affairs Committee on January 23, 2014. No further action has been taken.
On May 10, 2016, Governor Lawrence Hogan signed into law HB 1378, a law establishing the Maryland Small Business Retirement Savings Program and Trust. HB 1378 was introduced by Delegate William Frick , and its counterpart SB 1007 was introduced by Senator Douglas J. J. Peters. The new law went into effect on July 1, 2016.
As signed into law, HB 1378 establishes a retirement savings program for employees working for companies who do not offer another qualified retirement program. The law creates an 11 member Board (with a four-year term) and gives it the authority to design the new retirement program.
The Board is required to establish a process for automatically enrolling employees, establishing default contribution amounts and investment options, a process for employees to opt-out of the program and to opt back in, a process to select approved vendors and to operate the program so that administrative expenses are minimized. Expenses are capped at 0.5 percent of funds under management. The Board is authorized to borrow money to establish the program until such time as it generates enough fees to be self-sustaining. The Board is also tasked with establishing a process by which employees of non-participating employers may participate in the Program if their employer does not offer another retirement option.
The Board is directed to select a broad range of investment options and vendors, and may include an option that provides lifetime income.
In March 2012, Massachusetts enacted HR 3754, an Act Providing Retirement Options for Nonprofit Organizations. The new law allows the State Treasurer to sponsor a retirement savings plan for workers at small non-profit organizations in the Commonwealth. Participation by the organizations is voluntary. The retirement plan would be a tax-qualified defined contribution arrangement with various investment options available to employees. Contributions could be made by workers, their employers, or both.
Features of the plan currently include an automatic six percent payroll deduction with an option for the employer to opt for a four percent initial automatic contribution with an escalation of up to 10 percent. Hardship withdrawals will be allowed but specific guidelines for the withdrawals are not yet finalized. A “not-for-profit defined contribution committee” of five members would be established to assist the State Treasurer in developing policy and providing technical advice for the plan. The plan would be marketed particularly to nonprofits with 20 or fewer employees.
The plan will fall under the jurisdiction of ERISA. In June, 2014, the IRS ruled favorably on the proposal and is in the process of reviewing the group trust that the accounts will be pooled with for investment efficiencies. The Massachusetts Treasurer’s Office will formally roll out the plan once the IRS work is completed.
Also, on January 20, 2015, H. 939 was introduced by Representative Angelo Scaccia and referred to the Joint Committee on Financial Services. A joint hearing on H. 939 and H. 924 was held on November 23, 2015.
The bill would establish the Massachusetts Secure Choice Savings Program and is modeled after the Illinois retirement legislation. H. 939 would establish a payroll-deduction IRA for workers whose employers do not offer any other retirement savings vehicle in the workplace. The bill requires all businesses in existence at least two years with 25 or more employees to automatically enroll their employees in the Security Choice Savings Program, unless they offer another retirement option to their workers.
Employees can determine a contribution level and select among a small number of investment options. A default contribution level of three percent of salary is offered to those who do not select one on their own, as is a default life-cycle investment fund for those who do not choose one from the options offered. Assets are pooled into a single fund and managed by the Massachusetts Treasurer and a qualified board, providing participants the benefit of low fees and competitive investment performance.Employees can choose to opt out of the program at any time.
The law is to be implemented within 24 months unless enough funds are not made available for the project. The Board must also find that the program is self-sustaining, that it is eligible for favorable federal tax treatment, and that it is not subject to ERISA.
H. 924 would establish a Secure Choice Retirement Savings Board to administer two retirement savings trust funds known collectively as the Secure Choice Retirement Savings Trusts. The first of these trusts, named the Secure Choice Multiple-Employer Retirement Trust (MERP), is a profit-sharing defined contribution plan offering individual accounts. The second trust, the Secure Choice Individual Retirement Account Trust (IRAP), would accept individual contributions through payroll deduction and direct payment into IRAs. Assets would be pooled and professionally managed and neither the state nor the employer would be responsible for any liabilities. The Board and Plan administrator shall act as fiduciaries under ERISA for the MERP plan. Employers shall not be considered fiduciaries.
Participation by employers with 10 or more employees is mandatory unless they offer their employees another retirement savings plan. Self-employed individuals and employers with fewer than 10 employees may participate on a voluntary basis. Unless otherwise specified by the employer or directed by the employee, a default contribution of three percent of the employee’s annual salary shall be made to the plan. The board may adjust this default contribution from two to five percent and may vary that amount according to the length of time the employee has contributed to the program.
Benefits to participants in the MERP shall be paid in the form of lifetime annuities. Employees who participate in both the MERP and IRAP have the option of rolling over all or part of their IRAP into their MERP before it is converted into a lifetime annuity. Participants in the MERP have the option of taking up to $20,000 (as long as it is no more than 50 percent of their account balance) in the form of a lump sum.
On February 27, 2014, HF 2419 was introduced by Rep. Patti Fritz and others, and was referred to the Government Operations Committee. Over the following month, the bill was considered by the Commerce and Consumer Protection Finance and Policy Committee, State Government Finance and Veterans Affairs, and the Ways and Means Committee. The bill was subsequently incorporated into HF 2536, the Women’s Economic Security Act, which was considered and reported out of the House on May 7, 2014, and the Senate on May 9, 2014. The bill was signed into law by the Governor on May 11, 2014.
As enacted, the bill required the Commissioner of Management and Budget of the state to provide a report to the legislature by January 15, 2015, evaluating the potential for a state-administered retirement savings plan for workers who do not have access to a retirement plan though their employer. The potential state-administered plan would have to provide for individuals to make contributions to their own accounts which would be pooled and invested by the State Board of Investment. The state would have no liability for investment earnings and losses. The plan should be designed so employers would be discouraged from dropping existing retirement plan options. /p>
The report was required to include a number of items, including estimates of the numbers of Minnesota workers who could be served by the plan, the participation rate that would make the plan self-sustaining, the effect of federal tax laws and ERISA, and the potential use and availability of investment strategies and insurance against loss to limit or eliminate potential state liability and manage risk to the principal. Funds were appropriated to cover the cost of producing the report, and, in December 2014, the Minnesota Management and Budget Commissioner issued a Request for Proposals (RFP) to conduct the report. Under the terms of the RFP, the report is to identify at least one option for a state administered retirement savings plan for private sector employees, though it may include other options. Each option is to be fully explained, and include an implementation plan with start-up costs, and outline the pros and cons of each option. A final report has not yet been released.
On December 10, 2013, the Retirement Systems Committee of the Nebraska Legislature held a hearing to discuss LR 344, a resolution calling for an interim study to examine the availability and adequacy of retirement savings for Nebraska’s private-sector workers. The hearing was hosted by Committee Chair Senator Jeremy Nordquist.No further legislative action has been scheduled.
On January 8, 2015, HB 239 was introduced by Representative David Danielson. The bill would establish the Statutory Commission on Retirement Security to study the creation of a state-sponsored program for workers without access to a retirement plan through their employers. The commission would study a program that would provide for automatic enrollment into a payroll-deduction account, with an option for employees to opt out of the program. No employer contributions would be required. The accounts would be portable, and self-sustaining, and the assets would be pooled and professionally managed. The commission would be required to submit its report by November 1, 2015, and an appropriation of $100,000 would be authorized to support the commission.
HB 239 was voted on in the House on February 11, 2015, and the bill failed to advance.
On March 2, 2015, A 4275 was introduced by Assemblymen Vincent Prieto and others, and was referred to the Assembly Labor Committee on March 9, 2015. On June 18, 2015, the bill was reported out of the Labor Committee with amendments, and was referred to the Assembly Appropriations Committee. The bill was reported out of the Assembly Committee with amendments after a second reading on November 9, 2015 and was passed by the Assembly on December 3, 2015. On December 7, 2015, the bill was referred to the Senate Budget and Appropriations Committee.
A companion bill, S2831, was introduced by Senator Stephen M. Sweeney on March 16, 2015, and referred to the Senate Labor Committee. On October 19, 2015, S2831 was reported from the Senate Committee with amendments after a second reading and was referred to the Senate Budget and Appropriations Committee where it was reported out on December 21, 2015. On January 7, 2016, the Senate substituted House bill A4275 for the text of S2831 and passed the bill.
The bill was sent to Governor Chris Christie for consideration and was conditionally vetoed by the Governor, who proposed replacing it with the New Jersey Small Business Retirement Marketplace Act. The legislature replaced the text of the original bill with the Governor’s proposal and enacted the amended bill on January 11, 2016. The bill took effect immediately upon enactment.
Bill A4275 is modeled after the Washington State Small Business Marketplace Retirement Savings Bill and creates a virtual marketplace for small businesses in New Jersey to shop for private retirement plans for their employees. The new portal will be available to businesses with up to 100 employees and is voluntary for both employers and their workers.
The State Treasurer is tasked with designing and implementing a plan for the operation of the new Marketplace, and will contract with private sector entities who will establish a protocol for approving participating financial firms, design and operate a website through which employers may select plans, and develop marketing and educational materials. The private-sector entities shall ensure that licensed professionals who assist their clients to enroll in a plan will receive routine, market-based commissions or other compensation for their services.
The Treasurer shall ensure that the range of investment options offered by the firms is sufficient to meet the needs of savers with various levels of risk tolerance and various ages. The diverse array of private options available are to include life insurance plans that are designed for retirement purposes, and at least two types of plans that include a SIMPLE IRA type plan that provides for employer contributions to participating enrollee accounts and a payroll deduction IRA type plan in which the employer does not make contributions for enrollees.
The financial services firms participating in the Marketplace are to offer a minimum of two product options including a target date or similar fund and a balanced fund. The Marketplace shall also offer a myRA option in addition to any other approved plan. The Marketplace will not operate unless there are at least two financial services firms participating, but there is no limit to the total number of firms that can offer products.
The financial firms participating in the Marketplace shall not charge participating employers fees and shall not charge employees more than 100 basis points in total annual fees. The costs of operating the marketplace may be charged to participating financial firms, private funding sources or federal grants. If sufficient funds are raised, the Treasurer may offer incentive payments to participating employers. The Treasurer shall not expose the State to any liability under the Employee Retirement Income Security Act of 1974 (ERISA).
The bill that was vetoed by the Governor would have created the New Jersey Secure Choice Savings Program, modeled after the Illinois Secure Choice Retirement Savings Program. It would have required all businesses with 25 or more employees to automatically enroll their employees in the Secure Choice Savings Program unless they offered another retirement option to their workers. Employees could determine a contribution level, select among a small number of investment options and opt out at any time. A default contribution level of three percent of salary would have been offered to those who did not select one on their own, in addition to a default life-cycle investment fund for those who did not choose one from the options offered. Assets would have been pooled into a single fund and managed by the New Jersey Treasurer and the Board, providing participants the benefit of low fees and competitive investment performance.
Employers who did not enroll eligible employees would have been subject to penalties unless they could show reasonable cause for the failure. They also would have been subject to penalties if they failed to timely deposit employee’s contributions. Investment returns were not guaranteed by the State, and employers were not fiduciaries over the program, bore no responsibility for administration, investment or investment performance of the program, and would not have been liable with respect to investment returns, program design or benefits paid to program participants.
On February 26, 2015, Int 0692-2015 was introduced by Public Advocate Letitia James in the New York City Council. The bill would create a private pension advisory board to study the feasibility of establishing a pension fund for private sector workers in New York City. The board would consist of 11 members who have expertise in pension funds and finance. The bill does not set a deadline for the board to issue its report, but provides for the board’s dissolution upon issuance of the report. On June 23, 2015 a meeting on the bill was held in the Committee on Civil Service and Labor.No further action has been taken on the bill.
On February 27, 2015, New York City Comptroller Scott Stringer announced the creation of a Retirement Security Study Group. The study group is tasked with designing up to three retirement savings options by the fall of 2015 for consideration by a retirement task force. The study group is fully funded through existing resources within the Comptroller’s office.
On April 2, 2015, HB 515 was introduced by Representatives Schaffer, Ross, Glazier and Pierce. The bill was referred to the House Committee on Rules where no further action was taken before the conclusion of the legislative session.
HB 515, the Work and Save Plan Study directs the State Treasurer to study the establishment of a voluntary “Work and Save Plan Study” retirement program aimed at increasing the retirement savings options for private sector workers whose employers do not provide retirement savings plans. Participation in this program would be entirely voluntary and benefits would be portable between employers. In conducting the study, the bill directs the Department to consider the recommendations for such a program that were made by AARP. The State Treasurer is directed to report its findings and recommendations to the 2015 General Assembly when it reconvenes in 2016.
HR 1200 would have established the Save Toward a Retirement Today retirement savings program administered by the State Treasurer. Employers with no more than 100 workers who do not offer retirement plans to their employees would have been eligible to participate on a voluntary basis. Employees of qualifying employers who opt not to participate could have enrolled on an individual basis.
Contributions by employers were not required, and workers could select their own contribution amounts. Contributions would be tax deferred at both the state and federal levels. The state would not be held liable for investment performance. An appropriation of $100,000 would have been authorized to design and implement the program.
On October 2, 2013, SB 199 was introduced by Senator Eric KearneyThe bill was modeled after the California legislation and would establish the Ohio Secure Choice Retirement Savings Board, which would design and administer the Ohio Secure Choice Retirement Savings Program.
The program would be a state-sponsored payroll-deduction IRA for workers who do not have access to a retirement plan through their employers. Employers with five or more employees would be required to participate. Employees could select their contribution rate into the accounts, though a three percent of salary contribution would be set for those who do not select their own rate. Employees could opt-out at any time.
Assets would be pooled and professionally managed, and a minimum rate of return would be guaranteed through private insurance. Neither the state nor employers would be subject to any liability for fund performance. The program would be established only if the board finds that it will be self-sustaining, qualifies for favorable federal tax treatment, and is not subject to ERISA.
SB 199 was assigned to the Senate Finance Committee but did not advance during the 2013-2014 legislative session.
On July 7, 2013, Oregon’s state legislature passed HB 3436, which creates a task force to explore options for helping private-sector workers who lack access to a workplace retirement plan save for retirement. The bill was signed into law by Governor John Kitzhaber on August 1, 2013.
The task force issued its report on September 12, 2014. The report found that retirement security in the state had deteriorated since a similar report was issued in 1997. The task force recommended developing and making available a retirement savings plan to all Oregonians who do not have access to a plan through their employer.
The recommendations envision a plan with a minimum employer role, automatic enrollment for the employee (with the ability to opt out), payroll deduction, and automatic annual escalation of contributions (with opt-out). The plan would be part of an overall retirement security program directed by a state board aimed at increasing enrollment in retirement security accounts. The program should include market research, small-business outreach, research into incentives, seeking legal guidance, and efforts to increase financial literacy.
On February 10, 2015, HB 2960 and its counterpart SB 615 were introduced by Senators Beyer, Riley, Roblan, and Rosenbaum and Representatives Williamson and Read and others. Both bills were referred to Committees of jurisdiction in their respective houses, where hearings were held and the bills were amended. HB 2960 passed the Oregon House by a vote of 32-26 on June 10, 2015, and passed the state Senate on June 16, 2015, by a vote of 17-13. The legislation was signed into law by Governor Kate Brown on Julne 25. The Governor named an Executive Director of the Oregon Retirement Savings Program and the Oregon Retirement Savings Board began holding monthly meetings in November, 2015.
The Savings Board has continued monthly meetings in 2016 and has issued an RFP for Market Analysis, Program Design and Financial Feasibility Services with a due date of January 19, 2016. The Board has also developed a detailed implementation timeline for action through 2017 and has created a working group on plan design which meets regularly.
HB 2960/SB 615 would establish a seven-member Oregon Retirement Savings Board in the office of the State Treasurer to administer the Oregon Retirement Savings Plan. The board would develop a defined contribution retirement plan for Oregon workers that would be pooled and professionally managed. Employers who do not provide a retirement savings plan would be required to offer their employees the opportunity to contribute to the Oregon Retirement Savings Plan through payroll deduction. The plan must provide for automatic enrollment with a default contribution level, though workers must be given the option of opting-out of the plan. Account owners would have the ability to maintain the accounts regardless of their place of employment and could roll over funds to other retirement accounts.
Before the plan can be established, the board must conduct a legal and market analysis to assess the feasibility of the plan and the applicability of ERISA. The plan cannot be created if the Board determines it would be subject to ERISA. Otherwise, the bill requires contributions to begin no later than June 16, 2017.
Finally, the Board is required to report to the Legislative Assembly with the results of the market and legal analysis, potential cost to employers, timeline for implementation and other issues, including recommendations regarding ways to increase financial literacy, by December 31, 2016.
House Bill 6080 was introduced by Representatives Edwards, Blazejewski and others on April 15, 2015. The bill was referred to the House Committee on Labor and a hearing took place on April 30, 2015. The Committee recommended the bill be held for further study and no additional action has been taken.
House Bill 6080 would create an automatic enrollment payroll deduction IRA program for private sector workers that would be administered by the Department of Labor and Training (DLT).Employers who have been in business at least two years and have five or more employees would be required to participate in the program unless they receive a hardship waiver. Smaller employers may participate on a voluntary basis. The Department would be responsible for designing a program that would allow employees to opt out, select a contribution level and investment option, and terminate participation, and would facilitate education and outreach to employers and employees. The default contribution option would be set at three percent, unless the employee chooses a higher rate. Investment options would include a life-cycle fund or target date fund as the default options. Employers would not have fiduciary obligations related to this program, and neither employers nor the state are liable for any investment losses resulting from participation in the program.
Implementation would begin 24 months after enactment and employers would establish a payroll deposit retirement savings option within six months after implementation.
On January 30, 2015, joint resolution SJR 9 was introduced by Senator Todd Weiler and House Sponsor Jon Cox. The resolution passed the House on March 4, 2015 and was signed by the Senate President on March 9, 2015. It was sent to the office of the Lieutenant Governor for filing on March 18, 2015.
SJR 9 urges Utah’s small business workers and small business community to work with the state’s Legislature and its Treasurer to study and develop a model for saving for retirement through the workplace that is accessible to Utah’s workers. The community is further urged to consider legislation, if necessary, to put the plan into action.
On January 7, 2014, Senator Anthony Pollina introduced S 193, a bill creating an interim Public Retirement Plan Study Committee to evaluate the feasibility of establishing a public retirement plan. The Committee would also study whether private-sector employers of a certain size who do not offer an alternative retirement plan should be required to offer the public retirement plan through a voluntary payroll deduction that would be available to private-sector employees who are not covered by an alternative retirement plan.The findings and recommendations of the Committee were due on January 15, 2015, at which point the authority of the Committee would sunset.
The bill was referred to the Committee on Economic Development, Housing and General Affairs on January 7, 2014, and was favorably reported to the Committee on Appropriations on March 3, 2014.Key provisions of S 193 were enacted as part of the FY 2015 budget bill on May 10, 2015.
On June 9, 2014, the Governor signed into law H 885 (Act 0179), legislation providing appropriations for Vermont agencies. Included in the bill was an appropriation of $5,000 to conduct an interim study on the feasibility of establishing a public retirement plan.
The Public Retirement Plan Study Committee conducted two meetings between November 26, 2014 and January 14, 2015, and subsequently issued an interim report.Due to the limited timeframe provided to the committee, the report was only able to identify a list of guiding principles that the committee should use to provide a framework for its analysis and to recommend to the General Assembly that the mandate of the committee be extended for a year (to January 16, 2016) to allow it to complete a more comprehensive report. No further action has been taken.
On January 14, 2015, HB 1998 was introduced by Delegate Luke Torian. The bill passed the House unanimously on February 10, 2015 and passed the Senate unanimously on February 24, 2015. It was signed by the Governor on March 27, and will go into effect on July 1, 2015.
HB 1998 establishes a Virginia Retirement System working group directed to develop recommendations to encourage and facilitate savings for retirement. The working group will review current state and federal programs that encourage Virginia’s citizens to save for retirement by participating in retirement savings plans. The review will include an examination of retirement savings options for self-employed individuals, part-time workers, full-time workers whose employers do not offer a retirement savings plan, and groups with low rates of savings.
The working group will include representatives of the Virginia Department of Taxation, small business, the self-employed, the Virginia College Savings Plan, and other stakeholders. The working group is directed to report its findings to the Governor and the General Assembly by January 1, 2017. The findings may include recommendations for changes in legislation to achieve its goal of increasing retirement savings.
On February 4, 2015, SB 5826, the Washington State Small Business Marketplace Retirement Savings Bill, was introduced by Senators Mark Mullet and Don Benton and was assigned to the Senate Committee on Financial Institutions and Insurance. After public hearings and consideration in a number of Senate committees, an amended version of the bill passed the Senate on April 10, 2015. HB 2109, the House companion bill, was introduced on February 12, 2015, and was referred to the House Committee on Appropriations. The committee passed the bill and referred it to the Rules Committee, and it ultimately passed the House, as amended by the Senate, on April 22, 2015. The Governor signed the bill into law on May 18, 2015. The Department of Commerce in Washington issued a request for proposals in November, 2015 and established a Small Business Marketplace information page on the Department’s website. A draft rule governing the establishment of the Washington State Small Business Marketplace was published for public review and comment in December, 2015. A hearing on the draft rule has been scheduled for March 16, 2016 and the rule’s intended date of adoption is March 25, 2016.
The bill establishes a small-business retirement plan marketplace in the state Department of Commerce. The marketplace would promote participation in low-cost, low-burden retirement savings plans and educate small employers on plan availability. The director of the marketplace would work with the private sector to establish a program that connects eligible employers with qualifying plans. Participation in the marketplace is completely voluntary for both employers and employees, but only those who are self-employed, sole proprietors or employers with fewer than one hundred employees are eligible to participate.
The marketplace director must approve a diverse array of private retirement plan options, including life insurance plans that are designed for retirement purpose, and at least three types of plans: a SIMPLE IRA that allows for employer contributions into participating worker’s accounts, a payroll-deduction IRA that does not allow employer contributions, and the myRA, the retirement savings vehicle proposed by the Obama administration that is backed by Treasury bonds.
The financial services companies approved to participate in the marketplace must offer a minimum of two product options: a target-date or other similar fund which provides asset allocations and maturities designed to coincide with the expected date of retirement of the participant, and a balanced fund.
Plans offered through the marketplace must include the option to roll over contributions to different retirement accounts. Although these plans are subject to ERISA, Washington State is not exposed to ERISA liability.
The program designed by the director must:
- Establish a protocol for reviewing and approving the qualifications of private sector financial firms seeking to participate in the marketplace
- Design and operate an internet website that includes information describing how eligible employers can participate in the marketplace
- Develop marketing materials about the marketplace that can be distributed electronically, posted on various agency websites, and inserted in agency mailers
- Identify and promote existing federal and state tax credits and benefits for employers and employees that are related to encouraging retirement savings or participating in retirement plans, and
- Promote the benefits of retirement savings and financial literacy.
Finally, the bill authorizes the appropriation of $100,000 in 2015 and $50,000 in 2016-2018 for implementation of the legislation.
The Senate Concurrent Resolution would direct the Joint Committee on Government and Finance to study the need and feasibility of the state creating a cost-effective and portable group retirement savings program for small businesses and their workers. The study would include a comparison of the costs of establishing the program with currently available private sector financial and retirement security opportunities for small business (defined as businesses with 50 or fewer employees).
SCR 58 directed that the report by submitted to the regular session of the legislature in 2016 and include drafts of any legislation that would be needed to implement its recommendations. The funds to conduct the study would be taken from the Joint Committee’s normal appropriations.
On February 24, 2015, SB 45 was introduced by Senator Dave Hansen and others and was referred to the Committee on Labor and Government Reform. The Assembly companion bill, AB 70, was introduced on March 5, 2015 and was referred to the Committee on Financial Institutions. No further action has been taken on either bill.
The bills would establish the Wisconsin Private Retirement Security Board and require the board to design a Wisconsin private retirement security plan. The board is required to study the financial feasibility of such a plan and recommend a design structure that is most reasonable in light of the potential participant population and cost of the plan. The board is also required to hold a minimum of five public hearings within three months on the plan, at least one of which will be held in each of the geographic areas of the State. The board must design the plan so that it mirrors, to the extent possible, the Wisconsin Retirement System.
The board is required to submit its report 18 months after enactment of the legislation. The report is required to include an estimate of the cost of initial establishment and administration of the plan, an estimate of the amount of time necessary to make the plan viable, and a recommendation for any legislation that is necessary to implement the plan. The bill directs the Department of Employee Trust Funds to provide staff and other resources to assist the Board in performing its duties and submit an estimate for the supplemental funds that may be necessary to implement the plan.
Finally, the bill allows the board to charge participants reasonable fees to cover the costs of implementing and administering the plan.
Updated May 2016
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