2020 -- H 7461

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LC003219

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2020

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A N   A C T

RELATING TO PUBLIC FINANCE -- ESTABLISHING RHODE ISLAND SECURE CHOICE

RETIREMENT SAVINGS TRUST ACT

     

     Introduced By: Representatives Shanley, Shekarchi, Barros, Vella-Wilkinson, and
Williams

     Date Introduced: February 06, 2020

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 35 of the General Laws entitled "PUBLIC FINANCE" is hereby

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amended by adding thereto the following chapter:

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CHAPTER 23

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RHODE ISLAND SECURE CHOICE RETIREMENT SAVINGS TRUST ACT

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     35-23-1. Short title.

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     This chapter shall be known and may be cited as the "Rhode Island Secure Choice

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Retirement Savings Trust Act."

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     35-23-2. Definitions.

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     As used in this chapter:

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     (1) "Board" means the Rhode Island secure choice retirement savings investment board.

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     (2) "RISavers retirement savings program" or "program" means a retirement savings

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program offered by the Rhode Island secure choice retirement savings trust.

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     (3) "Eligible employee" means a person who is employed by an eligible employer.

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     "Eligible employee" does not include:

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     (i) Any employee covered under the federal Railway Labor Act (45 U.S.C. Sec. 151), or

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any employee engaged in interstate commerce not subject to the legislative powers of the state,

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except insofar as application of this chapter is authorized under the United States Constitution or

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laws of the United States; or

 

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     (ii) Any employee on whose behalf an employer makes contributions to a Taft-Hartley

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pension trust fund.

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     (4) "Eligible employer" means a person or entity engaged in a business, industry,

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profession, trade, or other enterprise in the state, whether for-profit or not-for-profit, excluding

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the federal government, the state, any county, any municipal corporation, or any of the state's

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units or instrumentalities, that has five (5) or more employees and that satisfies the requirements

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to establish or participate in a payroll deposit retirement savings arrangement or an employer of a

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provider of in-home supportive services. "Eligible employer" does not include an employer that

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provides a retirement savings program as described in § 35-23-16.

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     (5) "IRA" means an individual retirement account or individual retirement annuity under

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Section 408(a), 408(b), or 408A of Title 26 of the United States Code.

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     (6) "Participating employer" means an eligible employer that provides a payroll deposit

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retirement savings arrangement provided for by this chapter for eligible employees.

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     (7) "Payroll deposit retirement savings arrangement" means an arrangement by which an

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employer allows employees to remit payroll deduction contributions to a retirement savings

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program, which may include an IRA, and in the case of a payroll deduction IRA arrangement, to

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remit specifically to an IRA.

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     (8) "Trust" means the Rhode Island secure choice retirement savings trust established by

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this chapter.

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     (9) "Vendor" means an investment company registered or exempt from registration

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pursuant to the provisions of the general laws or a life insurance company qualified to do business

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in Rhode Island that provides retirement investment products. "Vendor" also includes a company

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that is registered to do business in Rhode Island that provides payroll services or recordkeeping

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services and offers retirement plans or payroll deduction IRA arrangements using products of

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regulated investment companies and insurance companies qualified to do business in Rhode

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Island. "Vendor" shall include individual registered representatives, brokers, financial planners,

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or agents.

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     35-23-3. Creation, membership, and terms of the Rhode Island secure choice

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retirement savings investment board.

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     (a) There is authorized, created, and established a public corporation of the state, having a

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distinct legal existence from the state and not constituting a department of the state government,

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with the politic and corporate powers set forth in this chapter, to be known as the Rhode Island

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secure choice retirement savings investment board (the "board"), to carry out the provisions of

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this chapter. The board is constituted as a public instrumentality and agency exercising public and

 

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essential governmental functions, and the exercise by the board of the powers conferred by this

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chapter shall be deemed and held to be the performance of an essential governmental function of

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the state.

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     (b) It is the intent of the general assembly by the passage of this chapter to create and

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establish a public corporation and instrumentality and agency of the state for the purpose of the

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activities authorized by this chapter, and to vest the corporation with all powers, authority, rights,

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privileges, and titles that may be necessary to enable it to accomplish those purposes. This

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chapter shall be liberally construed in conformance with the purpose expressed in this section.

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     (c) The powers of the corporation shall be vested in nine (9) members, consisting of the

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general treasurer, or designee, who shall act as chairperson; the director of administration, or

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designee; the director of the department of business regulation, or designee; an individual with

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retirement and investment expertise to be appointed by the governor with advice and consent of

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the senate for an initial term of two (2) years; a member of the public to be appointed by the

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governor with advice and consent of the senate for an initial term of one year; an individual with

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small business administration experience to be appointed by the governor with the advice and

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consent of the senate, for an initial term of two (2) years; an individual with expertise in finances

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or investments to be appointed by the governor with the advice and consent of the senate, for an

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initial term of three (3) years; a certified public accountant to be appointed by the governor with

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the advice and consent of the senate, for an initial term of three (3) years; and an individual with

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expertise in retirement planning to be appointed by the governor with the advice and consent of

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the senate, for an initial term of one year.

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     (d) After the initial term, all appointed members shall serve staggered three (3) year terms

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or until their respective successors are appointed and qualified after expiration of the appointed

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term.

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     (e) Any vacancy occurring in the office of a member by death, resignation, or otherwise

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shall be filled in the same manner as the original appointment.

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     (f) Members shall receive no compensation for the performance of their duties but may

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be reimbursed reasonable expenses.

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     (g) The members of the board shall at regular intervals at least eight (8) times a year

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conduct business meetings for the purpose of carrying out its general business. The meetings shall

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be open to the public and all records and minutes will be a matter of public record. The board

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shall be considered a "public body" and shall be subject to the provisions of chapter 46 of title 42

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("open meetings") and to the provisions of title 38 concerning public records.

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     (h) The board shall continue until its existence is terminated by law.

 

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     (i) The state shall indemnify and hold harmless every past, present, or future member,

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officer, or employee of the board who is made a party to or is required to testify in any action,

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investigation, or other proceeding in connection with or arising out of the performance or alleged

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lack of performance of that person's duties on behalf of the corporation. These persons shall be

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indemnified and held harmless, whether they are sued individually or in their capacities as

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members, officers, or employees of the board, for all expenses, legal fees and/or costs incurred by

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them during or resulting from the proceedings, and for any award or judgment arising out of their

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service to the corporation that is not paid by the board and is sought to be enforced against a

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person individually, as expenses, legal fees, costs, awards or judgments occur. Provided,

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however, that neither the state nor the corporation shall indemnify any member, officer, or

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employee:

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     (1) For acts or omissions not in good faith or which involve intentional misconduct or a

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knowing violation of law;

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     (2) For any transaction from which the member derived an improper personal benefit; or

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     (3) For any malicious act.

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     (j) No one shall be eligible for appointment unless they are a resident of the state.

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     35-23-4. Rhode Island secure choice retirement savings trust.

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     (a) There is hereby established a retirement savings trust known as the Rhode Island

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secure choice retirement savings trust to be administered by the board for the purpose of

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promoting greater retirement savings for Rhode Island private employees in a convenient,

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voluntary, low-cost, and portable manner. After sufficient funds are made available for this

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chapter to be operative, the Rhode Island secure choice retirement savings trust, as a self-

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sustaining trust, shall pay all costs of administration only out of monies on deposit therein.

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     (b) The board shall segregate monies received by the Rhode Island secure choice

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retirement savings trust into two (2) funds, which shall be identified as the program fund and the

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administrative fund. Monies in the trust may be hereby continuously appropriated, without regard

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to fiscal years, to the board for the purposes of this chapter.

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     (c) Monies in the program fund may be invested or reinvested by the treasurer or may be

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invested in whole or in part under contract with the board of a Rhode Island public retirement

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system, with private money managers, or a combination thereof, as determined by the board.

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     (d) Transfers may be made from the program fund to the administrative fund for the

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purpose of paying operating costs associated with administering the trust and as required by this

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chapter, including, but not limited to, board operations, program administrator and investment

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expenses, and enforcement and compliance costs. On and after six (6) years from the date the

 

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program is implemented, on an annual basis, expenditures from the administrative fund shall not

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exceed more than one percent (1%) of the total program fund. All costs of administration of the

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trust shall be paid out of the administrative fund.

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     (e) Any contributions paid by employees and employers into the trust shall be used

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exclusively for the purpose of paying benefits to the participants of the RISavers retirement

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savings program, for the cost of administration of the program, and for investments made for the

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benefit of the program.

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     (f) The Rhode Island secure choice retirement savings trust is an instrumentality of the

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state. Any security issued, managed, or invested by the Rhode Island secure choice retirement

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savings investment board within the Rhode Island secure choice retirement savings trust on

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behalf of an individual participating within the RISavers retirement savings program shall be state

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income tax deferred for investment earnings to include interest, dividends and capital gains until

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such time as withdrawal pursuant to the terms of this chapter.

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     35-23-5. Payroll deduction.

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     The RISavers retirement savings program shall include, as determined by the board, one

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or more payroll deduction IRA arrangements.

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     35-23-6. Powers of the board.

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     (a) The board shall have the power and authority to do all of the following:

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     (1) Make and enter into contracts necessary for the administration of the trust;

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     (2) Adopt a seal and change and amend it from time to time;

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     (3) Cause monies in the program fund to be held and invested and reinvested;

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     (4) Accept any grants, gifts, legislative appropriation, and other monies from the state,

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any unit of federal, state, or local government or any other person, firm, partnership, or

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corporation for deposit to the administrative fund or the program fund;

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     (5) Contract with a program administrator and determine the duties of the program

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administrator. The treasurer shall, on behalf of the board, appoint an executive director, who shall

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not be a member of the board and who shall serve at the pleasure of the board. The treasurer shall

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determine the duties of the executive director and other staff as appropriate and set their

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compensation. The board may authorize the executive director to enter into contracts on behalf of

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the board or conduct any business necessary for the efficient operation of the board;

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     (6) Make provisions for the payment of costs of administration and operation of the trust;

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     (7) Employ staff;

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     (8) Retain and contract with the board of a Rhode Island public retirement system, private

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financial institutions, other financial and service providers, consultants, actuaries, counsel,

 

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auditors, third-party administrators, and other professionals as necessary;

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     (9) Procure insurance against any loss in connection with the property, assets, or

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activities of the trust;

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     (10) Procure insurance indemnifying each member of the board from personal loss or

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liability resulting from a member's action or inaction as a member of the board;

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     (11) Set minimum and maximum investment levels in accordance with contribution

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limits set for IRAs by the Internal Revenue Code;

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     (12) Collaborate and cooperate with the board of a Rhode Island public retirement

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system, private financial institutions, service providers, and business, financial, trade,

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membership, and other organizations to the extent necessary or desirable for the effective and

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efficient design, implementation, and administration of the program and to maximize outreach to

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eligible employers and eligible employees;

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     (13) Collaborate with, and evaluate the role of, licensed insurance agents and financial

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advisors in assisting and providing guidance for eligible employees;

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     (14) Cause expenses incurred to initiate, implement, maintain, and administer the

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program to be paid from contributions to, or investment returns or assets of, the program or

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arrangements established under the program, to the extent permitted under state and federal law;

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     (15) Facilitate compliance by the retirement savings program or arrangements established

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under the program with all applicable requirements for the program under the Internal Revenue

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Code of 1986, including tax qualification requirements or any other applicable law and

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accounting requirements, including providing or arranging for assistance to program sponsors and

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individuals in complying with applicable law and tax qualification requirements in a cost-

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effective manner; and

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     (16) Carry out the duties and obligations of the Rhode Island secure choice retirement

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savings trust pursuant to this title and exercise any and all other powers as appropriate for the

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effectuation of the purposes, objectives, and provisions of this title pertaining to the trust.

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     (b) The board shall adopt regulations it deems necessary to implement this chapter

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consistent with the Internal Revenue Code and regulations issued pursuant to that code to ensure

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that the program meets all criteria for federal tax-deferral or tax-exempt benefits, or both.

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     35-23-7. Additional authority of the board.

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     In addition to the powers and authority granted to the board pursuant to § 35-23-6, the

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board shall have the power and authority to do the following:

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     (1) Cause the retirement savings program or arrangements established under the program

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to be designed, established, and operated, in a manner consistent with all of the following:

 

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     (i) In accordance with best practices for retirement savings vehicles;

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     (ii) To encourage participation, saving, and sound investment practices, and appropriate

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selection of default investments; and

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     (iii) With simplicity, ease of administration for participating employers, and portability of

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benefits.

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     (2) Arrange for collective, common, and pooled investment of assets of the retirement

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savings program or arrangements, including investments in conjunction with other funds with

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which those assets are permitted to be collectively invested, with a view to saving costs through

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efficiencies and economies of scale;

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     (3) Disseminate educational information designed to educate participants about the

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benefits of planning and saving for retirement and information to help them decide the level of

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RISavers retirement savings program participation and savings strategies that may be appropriate

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for them;

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     (4) Disseminate information concerning tax credits available to small business owners for

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allowing their employees to participate in the program, and the federal Retirement Savings

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Contribution Credit (Saver's Credit) available to low- and moderate-income households for

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qualified savings contributions;

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     (5) Submit progress and status reports to participating employers and eligible employees;

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     (6) If necessary, determine the eligibility of an employer, employee, or other individual to

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participate in the program;

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     (7) Evaluate and establish the process by which an eligible employee of an eligible

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employer is able to contribute a portion of their salary or wages to the program for automatic

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deposit of those contributions and the participating employer provides a payroll deposit

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retirement savings arrangement to forward the employee contribution and related information to

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the program or its agents. This evaluation and process may include, but is not limited to, financial

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services companies and third-party administrators with the capability to receive and process

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employee information and contributions for payroll deposit retirement savings arrangements or

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other arrangements authorized by this chapter;

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     (8) Design and establish the process for the enrollment of program participants;

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     (9) Allow participating employers to use the program to remit employees' contributions

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to their IRAs on their employees' behalf;

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     (10) Allow participating employers to make their own contributions to their employees'

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IRAs, provided that the contributions would be permitted under the Internal Revenue Code and

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would not cause the program to be treated as an employee benefit plan under the federal

 

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Employee Retirement Income Security Act; and

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     (11) Evaluate and establish the process by which an individual or an employee of a

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nonparticipating employer may enroll in and make contributions to the program.

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     35-23-8. Disclosure of information.

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     (a) Prior to opening the RISavers retirement savings program for enrollment, the board

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shall design and disseminate to employers an employee information packet that shall be available

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in an electronic format. The packet shall include background information on the program and

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appropriate disclosures for employees.

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     (b) The disclosure form shall include, but not be limited to, all of the following:

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     (1) The benefits and risks associated with making contributions to the program;

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     (2) The mechanics of how to make contributions to the program;

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     (3) How to opt out of the program;

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     (4) The process for withdrawal of retirement savings; and

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     (5) How to obtain additional information on the program.

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     (c) In addition, the disclosure form shall clearly articulate the following:

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     (1) Employees seeking financial advice should contact financial advisors in that

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employers do not provide financial advice, that employees are not to contact their employers for

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financial advice, and that employers are not liable for employee investment decisions;

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     (2) This retirement program is not sponsored by the employer, and therefore the employer

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is not responsible for the plan or liable as a plan sponsor; and

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     (3) The program fund is not guaranteed by the state.

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     (d) The disclosure form shall include a method for the employee to acknowledge that the

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employee has read all of the disclosures and understands their content.

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     (e) The employee information packet shall also include an opt-out form for an eligible

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employee to note their decision to opt out of participation in the program. The opt-out form shall

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be simple and concise and drafted in a manner that the board deems necessary to appropriately

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evidence the employee's understanding that they are choosing not to automatically deduct

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earnings to save for retirement.

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     (f) The employee information packet with the disclosure and opt-out forms shall be made

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available to eligible employees by the RISavers retirement savings program and supplied to

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employees at the time of hiring. All new employees shall review the packet and acknowledge

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having received it.

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     (g) The employee information packet with the disclosure and opt-out forms shall be

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supplied to existing employees when the program is initially launched for a participating

 

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employer.

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     35-23-9. Vendor participation.

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     (a) Prior to opening the RISavers retirement savings program for enrollment, if there is

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sufficient interest by vendors to participate and provide the necessary funding, the board shall

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establish both of the following:

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     (1) A retirement investments clearinghouse on its Internet website; and

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     (2) A vendor registration process through which information about employer-sponsored

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retirement plans, and payroll deduction IRAs offered by private sector providers is made

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available for consideration by eligible employers.

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     (b) Vendors that would like to participate in the board's retirement investments

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clearinghouse and be listed on the board's Internet website as a registered vendor shall provide all

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of the following information:

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     (1) A statement of experience in Rhode Island and in other states in providing employer-

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sponsored retirement plans, and payroll deduction IRAs;

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     (2) A description by the vendor of the types of retirement investment products offered;

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     (3) A disclosure of all expenses paid directly or indirectly by retirement plan participants,

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including, but not limited to, penalties for early withdrawals, declining or fixed withdrawal

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charges, surrender or deposit charges, management fees, and annual fees, supported by

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documentation as required for prospectus disclosure by the National Association of Securities

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Dealers and the Securities and Exchange Commission. Vendors shall be required to provide

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information regarding the impact of product fees upon a hypothetical investment;

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     (4) The types of products, product features, services offered to participants, and

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information about how to access product prospectuses or other relevant product information;

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     (5) A discussion of the ability, experience, and commitment of the vendor to provide

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retirement counseling and education services, including, but not limited to, access to group

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meetings and individual counseling by various means, including telephone and

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telecommunications devices for the deaf (TDD), Internet, and face-to-face consultations by

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registered representatives;

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     (6) A statement of the financial strength of the vendor by identifying its ratings assigned

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by nationally recognized rating services that evaluate the financial strength of similar companies;

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     (7) The location of offices and counselors, individual registered representatives, brokers,

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financial planners, agents, or other methods of distribution, of the vendor that would serve

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employers and their employees in Rhode Island;

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     (8) A description of the ability of the vendor to comply with all applicable provisions of

 

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federal and state law governing retirement plans, including minimum distribution requirements

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and contribution limits;

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     (9) To the extent applicable, the demonstrated ability of the vendor to offer an

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appropriate array of accumulation funding options, including, but not limited to, investment

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options that offer guaranteed returns on contributions and the conversion of retirement savings

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account balances to secure retirement income, a diversified mix of value, growth, growth and

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income, hybrid, and index funds or accounts across large, medium, and small capitalization asset

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classes, both domestic and international;

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     (10) A discussion of the range of administrative and customer services provided,

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including asset allocation, accounting and administration of benefits for individual participants,

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recordkeeping for individual participants, asset purchase, control, and safekeeping, execution of a

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participant's instructions as to asset and contribution allocation, calculation of daily net asset

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values, direct access for participants to their account information, periodic reporting that is not

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less than quarterly to active participants on their account balances and transactions, and

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compliance with the standard of care consistent with federal law and applicable to the provision

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of investment services; and

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     (11) Certification by the vendor that the information provided to the board accurately

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reflects the provisions of the retirement investment products it registers.

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     (c) Vendors shall supply information and data in the format prescribed by the board.

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     35-23-10. Registration.

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     Registration shall be offered to vendors once annually, and renewal of registration shall

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be required at least once every five (5) years thereafter for vendors that elect to continue to

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participate in the retirement investments clearinghouse. The board shall provide public notice

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prior to the initial registration, annual registration, and registration renewal periods.

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     35-23-11. Vendor removal.

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     (a) The board may remove a vendor from the registry if the vendor submits materially

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inaccurate information to the board, does not remit assessed fees within sixty (60) days, or fails to

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submit notice of material changes to its registered investment products. Vendors found to have

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submitted materially inaccurate information to the board shall be allowed sixty (60) days to

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correct the information.

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     (b) The board shall remove a vendor from the registry if investments offered by the

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vendor are products of a regulated investment company or insurance company that is not licensed

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or has had its license revoked by the department of business regulation for engaging in conduct

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prohibited by those entities.

 

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     (c) Vendors that are denied registration or removed from the registry may appeal and

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have the denial or removal reviewed pursuant to the provisions of chapter 35 of title 42,

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("administrative procedures act").

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     35-23-12. Retirement investments clearinghouse.

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     (a) The board shall maintain the retirement investments clearinghouse containing the

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information required in § 35-23-9 about the retirement investment products offered by each

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registered vendor and objective comparisons of vendors and types of products.

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     (b) The clearinghouse shall include information on investment performance based upon

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the investment's average annual total return as measured by a nationally recognized rating service

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selected by the board for standard periods of time of not less than one year.

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     (c) The board's Internet website shall include a table showing, for each registered fund,

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the total fee cost in dollars incurred by a shareholder who initially invested five thousand dollars

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($5,000), earned a five percent (5%) rate of return for one-, five (5)-, ten (10)-, fifteen (15)-, and

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twenty (20)-year time periods. This table shall be accompanied by a disclaimer that the rate of

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return is for purposes of illustrating the respective impacts of different fee amounts on each

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investment, and is not to predict future investment returns.

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     (d) The board shall include a notice of the existence of, and the Internet website address

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for, the retirement investments clearinghouse in a notice disseminated to eligible employers.

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     35-23-13. Failure to disclose fee.

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     A vendor may not charge a fee associated with a registered product that is not disclosed.

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     35-23-14. Cost of vendor registration system.

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     (a) The actual cost of establishing the vendor registration system and the retirement

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investments clearinghouse shall be borne equally by registered vendors, based on the total

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number of registered vendors. Each registered vendor shall pay a one-time establishment fee

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equal to a pro rata share of the establishment costs charged to vendors that register with the board

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prior to the close of the initial registration period, as determined by the board. The one-time

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establishment fee charged to vendors that register with the board after the completion of the

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initial registration period shall be distributed equally among registered vendors that have paid the

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establishment fee and credited toward subsequent maintenance and administrative fees charged to

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each vendor.

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     (b) The actual cost of maintaining the vendor registration system and the retirement

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investments clearinghouse, and the costs associated with publicizing the availability of the

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clearinghouse to eligible employers, shall be borne equally by registered vendors, based on the

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total number of registered vendors. Each registered vendor shall pay a renewal fee equal to a pro

 

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rata share of the maintenance costs, as determined by the board.

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     (c) Each registered vendor shall pay an administrative fee for each retirement investment

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product it offers to employers, which shall represent the actual costs associated with processing

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the information related to the investment option and presenting it on the retirement investments

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clearinghouse, as determined by the board.

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     (d) The board shall not divert Rhode Island secure choice retirement savings trust funds

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to establish or maintain the vendor registration system or the retirement investments

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clearinghouse.

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     35-23-15. Board not responsible for inaccurate information.

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     (a) The board and the program, and its officers and employees, are not responsible for,

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and shall not be held liable for, the adequacy of the information provided by the participating

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vendors and contained in the clearinghouse. The clearinghouse maintained by the board serves

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only to provide information supplied by the participating vendors for the consideration of the

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selection of retirement investment products.

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     (b) Participating vendors shall not utilize the program's logo, or claim or infer

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endorsement or recommendation by the board or the program with respect to products and

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services identified by the vendors in the clearinghouse. At the discretion of the board, a violation

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of this section may lead to removal from the registry.

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     (c) The board and the program shall not be held liable for the actions of registered

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vendors.

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     35-23-16. Employer participation.

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     (a) After the board opens the RISavers retirement savings program for enrollment, any

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employer may choose to have a payroll deposit retirement savings arrangement to allow

24

employee participation in the program under the terms and conditions prescribed by the board.

25

     (b) Within twelve (12) months after the board opens the program for enrollment, eligible

26

employers with more than one hundred (100) eligible employees and that do not offer a

27

retirement savings program pursuant to subsection (g) of this section shall have a payroll deposit

28

retirement savings arrangement to allow employee participation in the program.

29

     (c) Within twenty-four (24) months after the board opens the program for enrollment,

30

eligible employers with more than fifty (50) eligible employees and that do not offer a retirement

31

savings program pursuant to subsection (g) of this section shall have a payroll deposit retirement

32

savings arrangement to allow employee participation in the program.

33

     (d) Within thirty-six (36) months after the board opens the program for enrollment, all

34

other eligible employers that do not offer a retirement savings program pursuant to subsection (g)

 

LC003219 - Page 12 of 18

1

of this section shall have a payroll deposit retirement savings arrangement to allow employee

2

participation in the program.

3

     (e) The board, in its discretion, may extend the time limits defined in subsections (b)

4

through (d) of this section.

5

     (f)(1) Each eligible employee shall be enrolled in the program unless the employee elects

6

not to participate in the program. An eligible employee may elect to opt out of the program by

7

making a notation on the opt-out form.

8

     (2) Following initial implementation of the program pursuant to this section, at least once

9

every two (2) years, the board shall designate an open enrollment period during which eligible

10

employees that previously opted out of the program shall be given the employee information

11

packet with the disclosure and opt-out forms, for the employee to enroll in the program or opt out

12

of the program by making a notation on the opt-out form.

13

     (3) An employee who elects to opt out of the program who subsequently wants to

14

participate through the employer's payroll deposit retirement savings arrangement may only

15

enroll during the board's designated open enrollment period or if permitted at an earlier time.

16

     (g)(1) An employer that provides an employer-sponsored retirement plan, such as a

17

defined benefit plan or a 401(k), Simplified Employee Pension (SEP) plan, or Savings Incentive

18

Match Plan for Employees (SIMPLE) plan, or that offers an automatic enrollment payroll

19

deduction IRA, shall be exempt from the requirements of the RISavers retirement savings

20

program, if the plan or IRA qualifies for favorable federal income tax treatment under the federal

21

Internal Revenue Code.

22

     (2) An employer shall retain the option at all times to set up and offer a tax-qualified

23

retirement plan, instead of having a payroll deposit retirement savings arrangement to allow

24

employee participation in the RISavers retirement savings program.

25

     (h) An eligible employee may also terminate their participation in the program at any

26

time in a manner prescribed by the board and thereafter by making a notation on the opt-out form.

27

     (i) Unless otherwise specified by the employee, a participating employee shall contribute

28

three percent (3%) of the employee's annual salary or wages to the program.

29

     (j) By regulation, the board may adjust the contribution amount set in subsection (i) of

30

this section to no less than two percent (2%) and no more than five percent (5%) and may vary

31

that amount within that two percent (2%) to five percent (5%) range for participating employees

32

according to the length of time the employee has contributed to the program.

33

     (k) The board may implement annual automatic escalation of employee contributions.

34

     (1) Employee contributions subject to automatic escalation shall not exceed eight percent

 

LC003219 - Page 13 of 18

1

(8%) of salary.

2

     (2) Automatic escalation shall result in no more than a one-percent-of-salary (1%)

3

increase in employee contributions per calendar year.

4

     (3) A participating employee may elect to opt out of automatic escalation and may set his

5

or her contribution percentage rate at a level determined by the participating employee.

6

     35-23-17. Employer liability protection.

7

     (a) Employers shall not have any liability for an employee's decision to participate in, or

8

opt out of, the RISavers retirement savings program, or for the investment decisions of employees

9

whose assets are deposited in the program.

10

     (b) Employers shall not be a fiduciary, or considered to be a fiduciary, over the Rhode

11

Island secure choice retirement savings trust or the program. The program is a state-administered

12

program, not an employer-sponsored program. If the program is subsequently found to be

13

preempted by any federal law or regulation, employers shall not be liable as plan sponsors. An

14

employer shall not bear responsibility for the administration, investment, or investment

15

performance of the program. An employer shall not be liable with regard to investment returns,

16

program design, and benefits paid to program participants.

17

     (c) An employer's voluntary contribution pursuant to § 35-23-7(j) shall not in any way

18

contradict the provisions of this section or change the employer's relationship to the program or

19

an employer's obligations to employees.

20

     (d) An employer shall not have civil liability, and no cause of action shall arise against an

21

employer, for acting pursuant to the regulations prescribed by the board defining the roles and

22

responsibilities of employers that have a payroll deposit retirement savings arrangement to allow

23

employee participation in the program.

24

     35-23-18. State immunity.

25

     The state shall not have any liability for the payment of the retirement savings benefit

26

earned by program participants pursuant to this chapter. The state, and any of the funds of the

27

state, shall have no obligation for payment of the benefits arising from this chapter.

28

     35-23-19. Annual audited financial report.

29

     (a) The board shall submit an annual audited financial report, prepared in accordance

30

with generally accepted accounting principles, on the operations of the Rhode Island secure

31

choice retirement savings trust by August 1 to the governor, and the legislature. The annual audit

32

shall be made by an independent certified public accountant and shall include, but not be limited

33

to, direct and indirect costs attributable to the use of outside consultants, independent contractors,

34

and any other persons who are not state employees.

 

LC003219 - Page 14 of 18

1

     (b) The annual audit shall be supplemented by the following information prepared by the

2

board:

3

     (1) Any studies or evaluations prepared in the preceding year;

4

     (2) A summary of the benefits provided by the trust including the number of participants

5

in the trust; and

6

     (3) Any other information that is relevant in order to make a full, fair, and effective

7

disclosure of the operations of the Rhode Island secure choice retirement savings trust.

8

     35-23-20. Required favorable federal tax treatment.

9

     (a) The board shall not implement the program if the IRA arrangements offered fail to

10

qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the

11

Internal Revenue Code, or if it is determined that the program is an employee benefit plan under

12

the federal Employee Retirement Income Security Act.

13

     (b) Prior to opening the program for enrollment, the board shall report to the governor

14

and legislature the specific date on which the program will start to enroll program participants

15

and that the following prerequisites and requirements for the program have been met:

16

     (1) The program is structured in a manner to keep the program from being classified as an

17

employee benefit plan subject to the federal Employee Retirement Income Security Act;

18

     (2) The payroll deduction IRA arrangements offered by the program qualify for the

19

favorable federal income tax treatment ordinarily accorded to IRA arrangements under the

20

Internal Revenue Code;

21

     (3) The board has defined in regulation the roles and responsibilities of employers in a

22

manner to keep the program from being classified as an employee benefit plan subject to the

23

federal Employee Retirement Income Security Act; and

24

     (4) The board has adopted a third-party administrator operational model that limits

25

employer interaction and transactions with the employee to the extent feasible.

26

     35-23-21. Prohibited conduct.

27

     A board member, program administrator, and other staff of the board shall not do any of

28

the following:

29

     (1) Directly or indirectly have any interest in the making of any investment made for the

30

program, or in the gains or profits accruing from any investment made for the program;

31

     (2) Borrow any funds or deposits of the trust, or use those funds or deposits in any

32

manner, for themselves or as an agent or partner of others; or

33

     (3) Become an endorser, surety, or obligor on investments by the board.

34

     35-23-22. Duties of board and staff.

 

LC003219 - Page 15 of 18

1

     (a) The board and the program administrator and staff, including contracted

2

administrators and consultants, shall discharge their duties as fiduciaries with respect to the trust

3

solely in the interest of the program participants as follows:

4

     (1) For the exclusive purposes of providing benefits to program participants and

5

defraying reasonable expenses of administering the program; and

6

     (2) By investing with the care, skill, prudence, and diligence under the circumstances

7

then prevailing that a prudent person acting in a like capacity and familiar with those matters

8

would use in the conduct of an enterprise of a like character and with like aims.

9

     (b) The board, subject to its authority and fiduciary duty, shall design and implement the

10

RISavers retirement savings program as follows:

11

     (1) For up to three (3) years following the initial implementation of the program, the

12

board shall establish managed accounts invested in United States Treasuries, or similar

13

investments; the board shall have the authority to provide for investment in accordance with the

14

provisions of federal law providing for tax deferred treatment;

15

     (2) The board shall develop and implement an investment policy that defines the

16

program's investment objectives and shall establish policies and procedures enabling investment

17

objectives to be met in a prudent manner. The board shall seek to minimize participant fees and

18

strive to implement program features that provide maximum possible income replacement

19

balanced with appropriate risk in an IRA-based environment. The policy shall describe the

20

investment options available to holders of individual savings accounts established as part of the

21

program. Investment options may encompass a range of risk and return opportunities and allow

22

for a rate of return commensurate with an appropriate level of risk to meet the investment

23

objectives stated in the policy;

24

     (3) The board shall annually prepare and adopt a written statement of investment policy

25

that includes a risk management and oversight program. The board shall consider the statement of

26

investment policy and any changes in the investment policy at a public hearing; and

27

     (4) The risk management and oversight program shall include an effective risk

28

management system to monitor the risk levels of the RISavers retirement savings program

29

investment portfolio and ensure that the risks taken are prudent and properly managed. The

30

program shall be managed to provide an integrated process for overall risk management on both a

31

consolidated and disaggregated basis, and to monitor investment returns as well as risk to

32

determine if the risks taken are adequately compensated compared to applicable performance

33

benchmarks and standards.

34

     (c) The board shall approve an investment management entity or entities, the costs of

 

LC003219 - Page 16 of 18

1

which shall be paid out of funds held in the trust and shall not be attributed to the administrative

2

costs of the board in operating the trust. Not later than thirty (30) days after the close of each

3

month, the board shall place on file for public inspection during business hours a report with

4

respect to investments made pursuant to this section and a report of deposits in financial

5

institutions.

6

     35-23-23. Rules and regulations.

7

     (a) The board may adopt regulations to implement this chapter.

8

     (b) The tax administrator in consultation with the board shall adopt rules and regulations

9

regarding the reporting and the deferral of taxers in accordance with the provisions of this

10

chapter.

11

     35-23-24. Effect on benefit means test.

12

     A payroll deposit IRA arrangement offered pursuant to the RISavers retirement savings

13

program shall have the same status as, and be treated consistently with, any other IRA for the

14

purpose of determining eligibility or benefit level for a program that uses a means test.

15

     35-23-25. Liberal construction.

16

     This chapter shall be construed liberally in order to effectuate its purpose. The purposes

17

of this chapter and all of its provisions with respect to the powers granted shall be broadly

18

interpreted to effectuate that intent and purposes and not as to any limitation of powers.

19

     SECTION 2. This act shall take effect upon passage.

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LC003219 - Page 17 of 18

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC FINANCE -- ESTABLISHING RHODE ISLAND SECURE CHOICE

RETIREMENT SAVINGS TRUST ACT

***

1

     This act would establish the Rhode Island secure choice retirement savings trust. The act

2

would establish an investment board which is a public corporation. The act would allow for

3

creation of IRA-type retirement investments managed by the investment board.

4

     This act would take effect upon passage.

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LC003219 - Page 18 of 18