A bill to establish the Minnesota Secure Choice Retirement Program (HF 782), a state-sponsored auto-IRA, passed through the Ways and Means Committee in the Minnesota House on Monday with the bill’s author praising “nerdy group” American Retirement Association (ARA) for its help and support.
Rep. Jamie Becker-Finn, DFL-Roseville, who introduced the bill, cited research in her pre-vote remarks that found more than 70% of workers earning between $30,000 and $50,000 per year participated in a retirement plan when offered through their employer. When not provided, participation in any retirement program or product fell to below 5% of workers within that salary range.
“It’s a very nerdy group to brag about getting support from, but the American Retirement Association is a big deal,” Becker-Finn, a small business owner, said. “The ARA recognizes that despite our best efforts in the private sector, there are far too many Americans without access to a retirement plan at work. So that is what we are trying to fix in this bill and would appreciate everyone’s support.”
While the bill awaits Senate Committee action, any grassroots efforts by advisors would aid in its passage, proponents said.
“In recent years, state governments have taken steps to close the retirement plan coverage gap in their jurisdictions with the enactment of laws such as HF 782,” ARA wrote in a letter to Minnesota lawmakers. “A key policy feature of most of these automatic IRA programs is a requirement that businesses over a certain size provide access to some type of retirement plan to their employees.”
It added that if employers do not already offer a workplace retirement plan, or do not want to adopt one available to them in the private marketplace, they can enroll their employees in the state program. To date, 12 states have enacted these programs.
Specific features of the Minnesota bill include:
- Participation in the program is mandatory for employers that do not sponsor their own workforce retirement savings plan, such as a 401(k) plan.
- The board of directors will set the initial contribution rate and an auto-escalation schedule.
- Employees can elect whether their contributions will be pre-tax or after-tax (Roth), can opt out of participation, or change the contribution rate.
- The annual limits on contributions to an account under the program are the federal IRA limits, which are $6,500 for individuals younger than age 50 and $7,500 for individuals aged 50 or older (these amounts are for 2023 and are annually adjusted by the U.S. Treasury Department).
- Employees direct the investment of their accounts into an array of investment funds offered through the State Board of Investment (similar to employee investment accounts in the Minnesota Deferred Compensation Plan).
- Upon leaving employment, an employee will be able to leave the employee’s account with the state for distribution at a later date or elect a distribution in the form of a lump sum or other options to be determined by the board, including lifetime income options.
“The ARA believes that HF 782 strikes the proper balance to close the retirement plan coverage gap in the private sector workforce to the greatest extent possible while imposing the minimum possible burden on Minnesota’s employers,” the ARA concluded in its letter. “This approach will not force the state to compete with the many existing retirement plan products in the marketplace.”