2015 -- H 6080

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LC002463

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2015

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- PRIVATE EMPLOYER IRA

PROGRAM

     

     Introduced By: Representatives Edwards, Blazejewski, Shekarchi, Canario, and

     Date Introduced: April 15, 2015

     Referred To: House Labor

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND

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GOVERNMENT" is hereby amended by adding thereto the following chapter:

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CHAPTER 16.2

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PRIVATE EMPLOYER IRA PROGRAM

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     42-16.2-1. Purpose of chapter. -- It is the express intention of the general assembly by

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the passage of this chapter to provide a retirement savings program in the form of an automatic

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enrollment payroll deduction IRA program, which is hereby established and shall be administered

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by the state department of labor and training (DLT) for the purpose of promoting greater

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retirement savings for certain private sector employees in a convenient, voluntary, low-cost, and

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portable manner.

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     42-16.2-2. Definitions. -- As used in this chapter:

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     (1) "Department" means the state department of labor and training.

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     (2)(i) "Employee" means an individual who is employed by an employer:

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     (ii) "Employee" does not include:

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     (A) Any employee covered under the federal Railway Labor Act, or any employee

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engaged in interstate commerce so as not to be subject to the legislative powers of this state,

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except insofar as application of this chapter is authorized under the laws of the United States;

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     (B) Any employee covered by a valid collective bargaining agreement that expressly

 

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provides for a multiemployer Taft-Hartley pension plan; and

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     (C) Any employee who is under eighteen (18) years of age before the beginning of the

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calendar year;

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     (3)(i) "Employer" means an individual or entity engaged in a business, industry,

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profession, trade, or other enterprise in this state, whether for-profit or not-for-profit, that has:

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     (A) Five (5) or more employees;

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     (B) Been in business at least two (2) years;

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     (C) Not offered a qualified retirement plan, including, but not limited to, a plan qualified

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under section 401(a), section 402(k), section 403(a), section 403(b), section 408(k), section

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408(p), or section 457(b) of the Internal Revenue Code, in the preceding two (2) years; and

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     (D) Satisfies the requirements to establish or participate in a payroll deposit retirement

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savings agreement;

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     (ii) Employer does not include:

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     (A) The federal government;

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     (B) The state; or

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     (C) Any of the state's units or instrumentalities, including any municipal government of

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the state or its agencies.

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     (4) "Enrollee" means any employee who is enrolled in the program;

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     (5) "IRA" means a traditional or Roth individual retirement account under section 408 A

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of the Internal Revenue Code;

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

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retirement savings arrangement for enrolled 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;

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     (8) "Program" means the private employer IRA program;

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     (9)(i) "Vendor" means a registered investment company, life insurance company, or

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qualified third-party administrator, authorized to do business in Rhode Island that provides or

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administers retirement investment products, including a company that is authorized to do business

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in Rhode Island that provides payroll services or recordkeeping services, and offers retirement

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plans or payroll deposit IRA arrangements using products of regulated investment companies and

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insurance companies qualified to do business in this state;

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     (ii) "Vendor" does not include individual registered representatives, brokers, financial

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planners or agents.

 

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     (10) "Wages" means any compensation, as defined by, section 219(f)(1) of the Internal

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Revenue Code, that is received by an enrollee from a participating employer during the calendar

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year.

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     42-16.2-3. Administration. – (a) The program shall be administered, for administrative

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purposes, to the department of labor and training.

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     (b) Routine administrative costs incurred by the program shall be absorbed in the budget

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for the department.

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     42-16.2-4. Powers and duties of department. – (a) The department, and all persons

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serving as program staff shall discharge their duties with respect to the program solely in the

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interest of the program's enrollees and beneficiaries.

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     (b) The department shall comply with and carry out the following responsibilities:

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     (1) Cause the program to be designed, established and operated in a manner that:

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     (i) Accords with best practices for retirement savings vehicles;

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     (ii) Maximizes participation, savings, and sound investment practices;

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     (iii) Maximizes simplicity, including ease of compliance and use for participating

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employers and enrollees;

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     (iv) Provides an efficient and cost-effective product to enrollees;

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     (v) Ensures the portability of benefits; and

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     (vi) Provides for the deaccumulation of enrollee assets in a manner that maximizes

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financial security in retirement.

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     (2) Comply with all applicable Federal law and regulations of the Department of the

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Treasury relating to the Internal Revenue Code.

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     (3) Make and enter into contracts necessary for the administration of the program.

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     (4) Evaluate and establish the process by which an enrollee is able to contribute a portion

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of his or her wages to the program for automatic deposit of those contributions and the process by

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which the participating employer provides a payroll deposit retirement savings arrangement to

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forward those contributions and related information to the program.

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     (5) Design and establish the process for enrollment under § 42-16.2-7, including the

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process by which an employee may:

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     (i) Opt not to participate in the program;

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     (ii) Select a contribution level;

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     (iii) Select an investment option; and

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     (iv) Terminate participation in the program.

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     (6) Keep annual administrative expenses as low as possible.

 

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     (7) Facilitate education and outreach to employers and employees.

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     (8) Carry out the duties and obligations of the program in an effective, efficient, and low-

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cost manner. This includes the authority to explore, with other state entities, the potential

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efficiencies which might be achieved by combining vendor contracting opportunities.

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     (9) Exercise any other powers reasonably necessary for the effectuation of the purposes,

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objectives, and provisions of this chapter pertaining to the program.

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     (10) If deemed necessary, request in writing an opinion or ruling from the appropriate

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entity with jurisdiction over the Federal Employee Retirement Income Security Act (ERISA)

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regarding the applicability of the Federal Employee Retirement Income Security Act to the

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program.

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     (11) Conduct or cause to be conducted an audit of program-related activities of any

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vendor.

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     (12) Enter into information sharing agreements with any other state government entity

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possessing data necessary for program administration.

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     (13) Recommend to the Rhode Island general assembly, for legislative action,

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nonpunitive incentives to encourage employer and employee participation, including, but not

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limited, to tax credits.

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     42-16.2-5. Employment of vendors. – (a) The state investment commission shall

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engage, through a procurement process, pursuant to the general laws, a vendor to serve as the

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default vendor with a three (3) year request for proposal.

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     (b) All other vendors selected by employers shall comply with all applicable federal and

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state laws, rules and regulations, as well as all administrative regulations promulgated by the

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department with respect to the program.

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     (c) All vendors shall provide the reports that the department deems necessary for the

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department to oversee the vendors' performance, including, but not limited to, usage reports to

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monitor compliance.

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     42-16.2-6. Investment options and contribution amount. – (a) The department shall

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insure that investment options include a life-cycle fund or a lifestyle balanced qualified default

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investment alternative governed by ERISA with a target date based upon the age of the enrollee.

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     (1) The life-cycle fund or a lifestyle balanced qualified default investment alternative

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governed by ERISA shall be the default investment option for enrollees who fail to elect an

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investment option unless and until the department designates by rule a new investment option as

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the default which it shall determine from appropriate qualified default investment alternatives.

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     (2) The contribution amount for the default option shall be three percent (3%) of wages

 

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earned during a payroll period.

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     (b) The department shall exercise its best efforts to also ensure that an appropriate menu

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of investment options are available to enrollees.

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     42-16.2-7. Implementations of program - Enrollment. – (a) Prior to the opening of the

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program for enrollment, the department shall develop, design, and disseminate to all employers

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an employer information packet and an employee information packet, which shall include

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background information on the program, appropriate disclosures for employees, and information

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regarding any program-related Internet website.

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     (b) The employee information packet shall include, but not be limited to, all of the

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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) How to participate in the program;

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     (5) The process for withdrawal of retirement savings;

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     (6) How to obtain additional information about the program;

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     (7) A statement advising employees seeking financial advice to contact financial

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advisors, and also stating that participating employers are not in a position to provide financial

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advice, and are not liable for the decisions employees make pursuant to this chapter;

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     (8) A statement that the program is not an employer-sponsored retirement plan;

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     (9) A statement that the program fund is not guaranteed by the state;

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     (10) A form for an employee to note his or her decision to opt out of participation in the

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program; and

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     (11) Information stating that the default option is a life-cycle qualified default investment

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alternative fund and that the initial investment amount shall be three percent (3%) of wages

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earned during a payroll period.

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     (c) Participating employers shall provide employees with a copy of the employee

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information packet upon the implementation of the program or at the time of hiring.

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     (d) Except as otherwise provided, the program shall be implemented and enrollment of

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employees shall begin within twenty-four (24) months after the effective date of this chapter.

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     (e) Each employer shall establish a payroll deposit retirement savings arrangement to

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allow each employee to participate in the program within six (6) months after implementation of

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the program.

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     (f) Any employer for whom compliance with this chapter would cause a hardship may

 

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notify the department of its need for an exemption from the requirements of this chapter. Any

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claim of hardship from an employer shall carry a rebuttable presumption of actual hardship and

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an exemption shall be granted as determined by the department of labor and training.

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     (g) Employers with four (4) or fewer employees that have been in business two (2) or

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more years may voluntarily elect to participate in the program pursuant to rules prescribed by the

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department.

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     (h) Employers shall enroll each employee who has not opted out of participation in the

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program, and shall provide payroll deduction retirement savings arrangements for these enrollees

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and deposit the funds into the program.

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     (i) Enrollees must select a contribution level of at least three percent (3%) of wages

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earned during each payroll period. This level may be set up to the deductible amount for the

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enrollee's taxable year under section 219(b)(1)(A) of the Internal Revenue Code.

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     (j) If an enrollee fails to select a contribution level using the form described in subsection

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(b) of this section, then the enrollee shall contribute three percent (3%) of his or her wages earned

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during a payroll period to the program, provided that this contribution does not cause the

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enrollee's total contributions to IRAs for the year to exceed the deductible amount for the

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enrollee's taxable year under section 219(b)(1)(A) of the Internal Revenue Code.

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     (k) Enrollees may change their contribution level at any time, subject to administrative

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regulations promulgated by the department.

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     (l) Enrollees may select an investment option or a mix of investment options contained

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within the program.

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     (m) Enrollees may change their investment option at any time, subject to administrative

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regulations promulgated by the department.

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     (n) If an enrollee fails to select an investment option, that enrollee shall be placed in the

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investment option selected by the state investment commission as the default under subsection

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(b)(11) of this section. If the state investment commission has not selected a default investment

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option, then an enrollee who fails to select an investment option shall be placed in the life-cycle

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fund investment option.

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     (o) Employers shall retain the option at all times to set up any type of employer-

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sponsored retirement plan, such as a defined benefit plan or a 401(k), simplified employee

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pension (SEP) plan, or savings incentive match plan for employees (SIMPLE), instead of having

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a payroll deposit retirement savings arrangement to allow employee participation in the program.

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     (p) An employee may terminate his or her participation in the program at any time in a

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manner prescribed by the department.

 

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     (q)(1) The state investment commission shall establish and maintain an Internet website

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designed to assist employers in identifying private sector providers of retirement arrangements

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that can be set up by the employer, rather than allowing employee participation in the program

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under this chapter;

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     (2) However, the state investment commission shall only establish and maintain an

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Internet website under this subsection if there is sufficient interest in such an Internet website by

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private sector providers and if the private sector providers furnish the funding necessary to

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establish and maintain the Internet website.

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     (3) The state investment commission shall provide public notice of the availability of and

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the process for inclusion on the Internet website address before it becomes publicly available.

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     (4) If the Internet website is available to the public before the department opens the

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program for enrollment, the Internet website address shall be included on any Internet website

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posting or other materials regarding the program offered to the public by the department.

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     (r) Enrollee contributions deducted by the participating employer through payroll

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deduction shall be paid by the participating employer to the vendors pursuant to payroll deposit

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retirement savings arrangements established by the department.

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     42-16.2-8. No liability for retirement savings benefits. – (a) The state shall have no

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duty or liability to any party for the payment of any retirement savings benefits accrued by any

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individual under the program.

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     (b) No state commission, commission, or agency, or any officer, employee, or member

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thereof shall be liable for any loss or deficiency resulting from particular investments selected

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under this chapter.

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     (c)(1) Participating employers shall not have any liability for an employee's decision to

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participate in, or opt out of, the program or for the investment decisions of any enrollee.

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     (2) A participating employer shall not be a fiduciary, or considered to be a fiduciary, over

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the program. A participating employer shall not bear responsibility for the administration,

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investment, or investment performance of the program. A participating employer shall not be

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liable with regard to investment returns, program design, and benefits paid to program

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participants.

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     42-16.2-9. Rules and regulations. – The department shall promulgate administrative

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rules and regulations, as necessary to carry out and implement the provisions of this chapter.

 

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     SECTION 2. This act shall take effect upon passage.

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LC002463

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- PRIVATE EMPLOYER IRA

PROGRAM

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     This act would establish a private employer IRA program allowing employees to

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contribute at least three percent (3%) of their payroll period wages with oversight by the state

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department of labor and training and the state investment commission.

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     This act would take effect upon passage.

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