Minnesota Secure Choice Retirement Program

Statutory Title: Minnesota Secure Choice Retirement Program Act
Statutory Citation: Minnesota Statutes section 187.01-.08.
Bill Number: House File 782
Issuing Body: State of Minnesota
Date Enacted: May 19, 2023
Effective Date: The statute is immediately effective, but the obligations of employers will not be operative until the program is fully established, which looks to be January 1, 2025.
In Brief: The State of Minnesota will be operating a retirement fund offering both IRAs, and Roth IRAs for employees whose employers do not offer them. Covered employers will have some work to do in helping their employees participate in this program.

In Detail:

• COVERAGE:
  • Employers:
    All private employers with five or more covered employees what do not sponsor or contribute to a retirement savings plan for their employees, and who did not do so in the preceding 12 months. (187.03 Subd. 6)
  • Employees: Any person employed by a covered employer, and who meets criteria to be determined by the Minnesota Secure Choice Board of Directors. (187.03 Subd. 5(a).)
    
    Does not include:
    • Persons who were under 18 on December 31 of the preceding year. (187.03 Subd. 5(b)(1).)
    • Persons covered by the federal Railway Labor Act. (187.03 Subd. 5(b)(2).)
    • Person for whom their employer makes contributions to a Taft-Hartley multiemployer fund. (187.03 Subd. 5(b)(3).)
    • Government employees. (187.03 Subd. 5(b)(4).)

• SUBSTANCE:
  • (The statute contains many details on the operation of these funds. Here, I’ve tried to include only those details in which employers might be interested.)
  • Covered employers will have to:
    • Enroll employees and withhold contributions from payroll unless the employee elects not to contribute. (187.07 Subd. 1.)
      • The statue is not explicit on this point, but this appears to be an “opt-out” program, meaning that silence from the employee means they are participating, and they will need to affirmatively decline if they don’t want to participate.
    • Remit contributions to the fund as required by the Board. (187.07 Subd. 2.)
    • Distribute to employees information prepared by the Board. This must be done at least 30 days prior to the date of the first paycheck from which employee contributions could be deducted. (187.07 Subd. 3.)
    • The Board may impose civil penalties for failure to do the above. (187.07 Subd. 6.)
  • Employers are not fiduciaries of the fund and are not liable to employees for damages arising out of participation in the program. (187.07 Subd. 4 & 5.)
  • Each participating employee will have an individual, vested account like IRAs offered in the free market. (187.06 Subd. 3 and 7.)
  • There will be administrative fees assessed against the employees’ accounts. (187.06(b).)
  • The Board will consist of 7 directors appointed by the Governor. (187.08.) These directors will be the fiduciary body of the plan. (187.09.) The State will not bear direct liability for the plan (187.10) but the State will indemnify the directors and hold them harmless in the event of lawsuits (187.09(4)). So effectively, the taxpayers will be on the hook for any breaches of fiduciary duty by the directors.

Future Government Action Required:

• The Board of Directors running this program will be appointed by January 14, 2024. The fund is to begin operations no earlier than January 1, 2025. The Board will need to fill in many details of the program such as fees, remittance timelines, remittance procedures, information that employers are required to distribute.

Immediate Action Items for Employers:

• If you are not currently offering an employer-sponsored retirement plan, you should begin evaluating which plan—a free-market plan, or the State’s plan, would better suit your workplace.

Economic Consequences and Non-Legal Considerations:

• Once again, the State of Minnesota is conscripting businesses and HR professionals to help operate its programs, without compensation.

• The details, costs, rules, and penalties associated with this program will be determined by unelected persons. Unlike HR professionals, these persons will be compensated for their involvement, with taxpayer dollars.

Date of this Report: April 25, 2024