Terch & AssociatesBlogEmployment LawMinnesota Secure Choice Retirement Program Act

Minnesota Secure Choice Retirement Program Act

Enacted on May 19, 2023, Minnesota introduced the Secure Choice Retirement Program, a significant legislative initiative aimed at providing a state-sponsored program allowing private sector employees to save for retirement.

Participation in the program will be mandatory for employers not offering workforce retirement saving opportunities to their employees. The program features an auto-escalation schedule for contribution rates, where employees have the flexibility to adjust their contributions or opt out entirely. The operational commencement of the program is set for no earlier than January 1, 2025.

Covered employers are private entities with five or more covered employees, excluding employers sponsoring or contributing to their own retirement savings plans within the preceding 12 months. Covered employers include those who contract with employee leasing companies or similar organizations who lack retirement savings plans. Tax-qualified retirement plans of any kind or Taft-Hartley multiemployer plans excludes employers. Covered employees, defined as those meeting specific criteria established by the program’s Board of Directors, includes individuals at least 18 years old working for covered employers. 

The Board of Directors appointed for the program holds pivotal responsibilities, including the establishment of account procedures, offering withdrawal and distribution options, and potentially extending program participation to individuals not employed by covered employers to include sole proprietors and self-employed individuals. Employees leaving employment can choose to retain their accounts with the State or opt for various distribution options determined by the Board. The Board, appointed by January 14, 2024, is tasked with finalizing program details, such as fees and remittance procedures, before rolling out the program. 

Covered employers bear specific obligations with the initial responsibility of enrolling all covered employees into the program unless an individual has specifically chosen to opt-out. Employers are responsible for providing program information to employees at least 30 days prior to first contributions, withholding participating employees’ contributions from payroll, and remitting payroll contributions to the program on a timely basis. Employers are not liable for employee participation, failure to participate, nor are they fiduciaries of the fund. They must adhere to contribution rate guidelines set by the Board, ensuring employees have an annual option to adjust rates or opt out of the program entirely.

There are no costs to employers, except for any incidental costs incurred to modify payroll systems to deduct contributions on either a pre-tax or after-tax basis and send them to the SBI for deposit into employee accounts. If a covered employer fails to enroll employees or fails to send contributions in a timely manner, the Board will establish to-be-determined penalties. 

Employers are not immediately mandated to implement the law, as the Board must first establish administrative procedures. The effective date for covered employers will be the day after the Board opens the program for enrollment. Meanwhile, employers not currently offering an employer-sponsored retirement plan should proactively evaluate whether the state-sponsored retirement plan aligns with their workplace needs or begin considering free-market plan options. Through the state-sponsored plan, Roth IRAs will be established for participants by default. 

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