Have an employee retirement plan?
By Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR
July 31, 2024
Minnesota joins California, Colorado, Oregon, Illinois and other states in creating a state-run retirement savings plan for employees working with small employers who do not offer an employer sponsored retirement plan.
A new Minnesota law (the Minnesota Secure Choice Retirement Program) goes into effect Jan. 1, 2025, and will require small private sector employers with five or more employees to provide a retirement program through the state if they do not currently offer a formal retirement plan.
For coverage purposes, employers that maintain a tax-qualified retirement plan of any kind (e.g., a 401(k) plan, a 403(b) plan, a traditional defined benefit or cash balance pension plan, an eligible Code Section 457 plan, a simplified employee pension plan, a SIMPLE plan or an automatic-enrollment payroll-deduction IRA) or that contribute to a Taft-Hartley multiemployer plan are excluded from participation in the Secure Choice program.
The new law requires that employers work with the state Board of Investments to establish the plan, withhold payroll contributions and remit payments to the state-run plan. Employees would automatically enrolled and have payroll deductions taken unless the employees “opted out” of the plan.
At this point, the program’s board of directors is in the process of organization and establishing administrative procedures. Employers are not required to comply with the new regulation until after this has occurred. Specific contribution rates, withdrawal and distribution options, default investment funds and options have yet to be determined. The funds will be IRA (individual retirement account) based and defaulted into Roth IRA post-tax accounts, but employees may decide to contribute on a pretax basis and select among investment options.
The initial deadline is Jan. 1, 2025, with roll out in phases to be completed within two years. Employers are not required to contribute to the plan, but employees will be 100% vested with their contributions. Watch for additional information once the specific details are determined.
You can explore the Minnesota Legislature bill on the
Secure Choice Retirement Plan online.
Larry Morgan, MA, SPHR, SHRM-SCP, GPHR, is the president of Orion HR Group and frequent MNCPA instructor and author. He is also the expert behind the MNCPA HR Hotline. Morgan brings more than 40 years of HR experience to the MNCPA in areas that include retail, high-tech, manufacturing and financial services. You can reach him at larry.morgan@orionhr.com or 952-210-0742.
