Legislation now before the Ohio House of Representatives would create a defined benefit plan for employees of private sector employers. It is believed to be the first such state proposal utilizing a DB plan rather than a defined contribution plan.
HB. 645, introduced May 19 by Reps. Stephanie Howse and Juanita Brent, both Democrats whose districts are in Cleveland, would establish the Ohio Retirement Savings Program.
The bill was referred to the House Committee on Commerce and Labor May 27.
The program would create an arrangement by which private sector employers would allow employees to have payroll deduction contributions remitted to a retirement savings program. Contributions paid by employees and employers into the fund would be used exclusively to pay benefits to the participants, the cost of program administration, and investments made for the benefit of the program.
Participating employees would be allowed to opt out at any time; however, those who do would not receive any refund of previous contributions, except as required by federal law. Employees who elect not to participate would be allowed to change that election and become a participant at any time.
Program Administration
H.B. 645 calls for the program to be administered by the Public Employees Retirement Board. The Board would consist of the following members, who would serve for four year terms:
- the state treasurer’s investment designee on the Public Employees Retirement Board;
- the director of administrative services;
- the two investment expert members on the Public Employees Retirement Board;
- one member appointed by the Speaker of the Ohio House of Representatives to represent eligible employees;
- one member appointed by the President of the Ohio Senate to represent participating employers; and
- one member appointed jointly by the Speaker of the House of Representatives and President of the Senate to represent the public.
The bill calls for the creation of a retirement savings trust that would be known as the Ohio Retirement Savings Fund, which would ultimately be under the aegis of the Ohio State Treasurer but would not be part of the state Treasury.
The Employer’s Role
The bill would apply broadly—to persons or non-governmental entities engaged in a business, industry, profession, trade or other enterprise, for-profits and non-profits alike.
The bill provides that any such employer that does not maintain an employer-sponsored retirement program that is tax-exempt under the Internal Revenue Code would be required to provide its eligible employees an automatic contribution arrangement and to enroll them in the Ohio Retirement Savings Program.
Employers would deduct from each paycheck payable to the employee a percentage of the employee’s compensation specified by the Public Employees Retirement Board and transmit those amounts to the Ohio Retirement Savings Trust.
The bill also spells out consequences for employers that do not provide an employer-sponsored retirement program and fail to provide an automatic contribution arrangement that allows employees to participate in the Ohio Retirement Savings Program. The bill provides that beginning six months after the date on which the Public Employees Retirement Board determines that the Ohio Retirement Savings Program is operational, the Board would fine an employer $100 per eligible employee for whom the employer fails to provide an automatic contribution arrangement that allows employees to participate.
The bill also calls for the state government to provide information to employers before enrollments in the Ohio Retirement Savings Program begin. It provides that the Public Employees Retirement Board would design and disseminate to employers an employee information packet through the Ohio Department of Job and Family Services. The packet would include background information on the program and appropriate disclosures for employees.
