10.05.2023 Written by: Henningson & Snoxell, Ltd.
The Minnesota Secure Choice Retirement Program Act (the “Program”) establishes a retirement savings program available to state residents employed by covered employers (those with five or more employees who do not already have a retirement program in place). Under the Program, individual retirement accounts (IRAs) will be established for eligible employees to fund with a portion of their paycheck.
- Participation in the Program is mandatory for employers that do not currently sponsor their own workforce retirement savings plan, such as a 401(k) plan, or those who have not sponsored one in the 12 months prior to the “Mandatory Implementation” date.
- Employers are not required to contribute to their employees’ retirement plan.
- “Covered Employees” include any employee of a covered employer who is at least 18 years old and satisfies any other criteria that may be established by the Program’s Board of Directors.
- Employees can:
- elect whether their contributions will be pre-tax or post-tax (Roth)
- change their contribution rate
- opt out of participation entirely
- Employers must provide Program Information to all covered employees (the Program Information required has not yet been made available by the State).
- Annual limits on contributions to an account under this Program will mirror the Federal IRA limits which are subject to annual adjustments. For 2023, these limits are $6,500 for individuals under the age of 50 and $7,500 for individuals over the age of 50.
- The Program is set to begin on or after January 1, 2025. The Board of Directors will meet on March 1, 2024, to establish administrative procedures for the Program.
Program Governance: Board of Directors
The Program will be administered by a Board of Directors comprised of seven (7) members: the executive director of the Minnesota State Retirement System; the executive director of the State Board of Investment; three (3) members chosen by the Legislative Commission on Pensions and Retirement with retirement plan expertise; one (1) private-sector member (appointed by the Governor) with plan administration experience; and one (1) small business owner (appointed by the Governor).
Note to Employers:
This means additional requirements for you including, but not limited to, withholding contributions from payroll, remitting the withheld contributions to the program, ensuring all necessary information is provided to employees, etc. So, be sure to pay close attention when this Program becomes effective as civil penalties will be imposed for compliance failures.
We do our best to keep employers updated so that you can make informed decisions as you operate your business. For now, there is no requirement that you implement anything. But if you have any questions or concerns about this Program and what it may mean for your business, please feel free to reach out. A member of our team would be happy to guide you through this change.