Legislative Analysis
Phone: (517) 373-8080
RETIREMENT SAVINGS PROGRAM ACT
http://www.house.mi.gov/hfa
House Bill 5461 (H-1) as reported from committee Analysis available at
Sponsor: Rep. Mike McFall http://www.legislature.mi.gov
Committee: Labor
Complete to 9-25-24
BRIEF SUMMARY: House Bill 5461 would create the Retirement Savings Program Act, which
would establish a state-run, automatic enrollment individual retirement account (commonly
known as an auto-IRA) program for Michigan employees.
FISCAL IMPACT: The bill would increase costs for the Department of Treasury and would have an
indeterminate fiscal impact on local units of government (see Fiscal Information, below).
THE APPARENT PROBLEM:
Many Americans are not saving enough for their retirement. The American Association of
Retired Persons (AARP) estimates that about 42% of Michigan’s private-sector employees do
not have access to a retirement plan through their employer and fewer than 10% of Michigan
residents contribute to a retirement plan outside of their jobs. 1 Women and people of color are
also disproportionately likely to lack sufficient retirement savings. Reportedly, a significant
barrier to access is some small employers’ concern that setting up a retirement plan would be
too costly, complicated, and time-consuming to operate.
THE CONTENT OF THE BILL:
House Bill 5461 would create a new act, the Retirement Savings Program Act, which would
establish a retirement savings program for private-sector employees in the form of an
individual retirement account (IRA) to be administered by a seven-member Secure Retirement
Savings Board. 2 The Michigan Secure Retirement Savings Program (MSRSP) would be
funded through automatic payroll deductions and open to any private-sector employee in
Michigan, although an employer would retain the right to set up an employer-sponsored
retirement plan or use a similar plan offered by a trade association or chamber of commerce
instead of participating in the program.
Employee would mean an individual who is at least 18 years of age, is employed by an
employer, and has wages allocable to Michigan during the calendar year for purposes
of the Income Tax Act. As applicable, it would also include a self-employed individual
who is enrolled in the Michigan Secure Retirement Savings Program or an enrollee
who is an employee of an employer not covered by the program.
Employer would mean a person or entity engaged in a for-profit or nonprofit business,
industry, profession, trade, or other enterprise in Michigan that has continuously
employed at least one employee in Michigan during the previous calendar year, has
1
https://www.aarp.org/content/dam/aarp/ppi/2022/state-fact-sheets/michigan.doi.10.26419-2Fppi.00164.024.pdf.
2
An employee’s retirement account under the program could be either a traditional IRA or a Roth IRA.
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 been in business at least 730 days after its first payroll, and has not offered a qualified
retirement plan 3 in the preceding 730 days. Employer would not include the federal
government, the state government, or any political subdivision of the state government.
Secure Retirement Savings Board
The act would create the Secure Retirement Savings Board (SRSB), which would be housed
in the Department of Treasury and would consist of the following seven members:
• The state treasurer, or a designee, who would be the chair.
• A designee of the state treasurer.
• The director of the Department of Technology, Management, and Budget or a designee.
• Two public representatives with expertise in retirement savings plan administration or
investment, who would be appointed by the governor.
• A representative of participating employers, who would be appointed by the governor.
• A representative of enrollees, who would be appointed by the governor.
Each of the governor’s appointments would be subject to the advice and consent of the Senate.
(Any appointment not acted on by the Senate within 60 session days would be considered to
have fulfilled this requirement.)
For the initial appointments, one of the public representatives would serve a term of four years
while the other would serve a term of two years. The representative of participating employers
would serve a term of three years, and the representative of enrollees would serve a term of
two years. Subsequent appointees would serve on the board for terms of four years.
Vacancies would be filled for the balance of an unexpired term in the same manner as the
original appointment. If a vacancy occurs while the Senate is in recess, the governor would
make a temporary appointment to serve until their next meeting.
Board members would not be compensated for their service but could be reimbursed for any
necessary travel expenses.
Board objectives
The Secure Retirement Savings Board would be responsible for administering the MSRSP with
the goal of promoting greater retirement savings for private sector employees in a convenient,
low-cost, and portable manner.
The board, its members, an appointed trustee and any other agents appointed or engaged by the
board, and all program staff would be required to discharge their duties (including the selection
of investment options available to enrollees) solely in the interest of the program’s enrollees
and beneficiaries as follows:
• For the exclusive purposes of providing benefits to enrollees and defraying reasonable
expenses of administering the program.
• By investing with the care, skill, prudence, and diligence under the prevailing
circumstances that a prudent person acting in a similar capacity and familiar with those
matters would use in conducting a similar enterprise.
3
Qualified retirement plan would include a plan qualified under sections 401(a), 401(k), 403(a), 403(b), 408(k),
408(p), or 457(b) of the Internal Revenue Code.
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 • By using any contributions paid by enrollees and employers into the trust exclusively
for the purpose of paying benefits to program enrollees, for the cost of administration
of the program, and for investments made for the benefit of the program.
The SRSB would have to cause the program to be designed, established, and operated in a
manner that does all of the following:
• Aligns with best practices for retirement savings vehicles.
• Maximizes participation, simplicity, ease of administration for enrollees and
participating employers, savings, and sound investment practices.
• Provides an efficient product to enrollees by pooling investment funds.
• Ensures the portability of benefits, including the ability for funds to be rolled over from
or into other retirement accounts.
The SRSB would have to provide for the payment of administrative costs and expenses for the
creation, management, and operation of the program in a manner that keeps annual
administrative expenses as low as possible. (Subject to appropriation, the state could pay for
administrative costs associated with creating and managing the program until sufficient funds
are available in the Secure Retirement Savings Program Fund, described below.)
Administrative fees would be proportionally allocated to enrollees’ IRAs.
Secure Retirement Savings Program Fund
The act would establish the Secure Retirement Savings Program Fund (SRSPF) as a trust
outside of Treasury, with the Secure Retirement Savings Board as its trustee. 4 The fund would
consist of money received from enrollees and participating employers through automatic
payroll deductions, in addition to contributions from other entities. Enrollees’ IRAs would be
maintained in the fund as individual accounts, but the SRSB would have to ensure that money
in the fund is held and invested as pooled investments with the goal of achieving cost savings
through efficiencies and economies of scale. (The fund would have to be operated in a manner,
as determined by the SRSB, that ensures that enrollees’ accounts meet federal requirements for
IRAs under the Internal Revenue Code.)
Money in the SRSPF could be invested or reinvested by the state treasurer or partially or wholly
invested under contract with one or more private investment managers. If the SRSB selects an
investment manager, the board would have to conduct an open bid process and would have to
consider the manager’s fees and charges in order to reduce administrative expenses. Investment
managers would have to provide any reports that the SRSB considers to be necessary to oversee
each manager’s performance and the performance of the SRSPF.
Secure Retirement Administrative Fund
The act would also establish the Secure Retirement Administrative Fund as a separate trust
fund in the Department of Treasury, from which the Secure Retirement Savings Board would
pay for any start-up administrative expenses and board expenses. The SRSB would deposit all
grants, gifts, donations, fees, and investment earnings used to recover administrative costs into
the Secure Retirement Administrative Fund, which could also receive grants or other money
designated for administrative purposes from any entity, in addition to interest and earnings
4
The board would have to appoint a trustee to administer the fund in compliance with section 408 of the Internal
Revenue Code.
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 from the fund’s investments. Money in the Secure Retirement Administrative Fund at the close
of a fiscal year would remain in the fund and would not lapse to the general fund.
Subject to appropriation, the SRSB could use money in the Secure Retirement and
Administrative Fund to cover expenses incurred in performing its duties under the act.
Statement of investment policy
The SRSB would have to prepare and adopt a written statement of investment policy that
includes a risk management and oversight program and that prohibits the SRSB, MSRSP, and
SRSPF from borrowing for investment purposes. The risk management and oversight program
would have to do the following:
• Ensure that an effective risk management system is in place to monitor the risk levels
of the MSRSP and the SRSPF portfolio.
• Ensure that the risks taken are prudent and properly managed.
• Provide an integrated process for overall risk management.
• Assess investment returns and risk to determine if the risks are adequately compensated
when compared to applicable performance benchmarks and standards.
The policy and any subsequent changes would have to be posted on the SRSB’s or Treasury’s
website at least 30 days before implementation and considered at a public hearing.
Michigan Secure Retirement Savings Program
The SRSB would have to perform the duties and obligations of the Michigan Secure Retirement
Savings Program in an effective, efficient, and low-cost manner and could exercise any powers
reasonably necessary to effectuate the program’s purposes and objectives. In administering the
program, the SRSB would be responsible for the following:
• Assembling the staff necessary to administer the Michigan Secure Retirement Savings
Program and determining their duties. 5
• Contracting as necessary to administer the program and the SRSPF.
• Facilitating program education, outreach, and compliance with all applicable
requirements under the Internal Revenue Code.
• Evaluating and, if necessary, procuring insurance against any loss in connection with
the property, assets, or activities of the Michigan Secure Retirement Savings Program. 6
(Any financial liability for the payment of benefits in excess of money available under
the MSRSP would be borne solely by these entities.)
The SRSB would also have to determine and establish processes for the following:
• Setting up an automatic payroll deduction for an enrollee and the participating
employers’ forwarding of the contributions and related information to the MSRSP.
• Enrolling in, opting out of, and terminating participation in the program.
5
As necessary, this could include employing staff, appointing a program administrator, and contracting with the State
Treasurer to make Department of Treasury employees available to administer the program.
6
As needed, each member of the board would be indemnified from personal loss or liability resulting from action or
inaction as a board member.
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 • Setting a contribution level and investment option. (Minimum and maximum
contribution levels for enrollees would be set in accordance with limits established for
IRAs in the Internal Revenue Code. 7)
• Defining default, minimum, and maximum (up to 15% of an enrollee’s wages)
contribution rates with an automatic escalation scale that increases an enrollee’s
contribution rate until it reaches the maximum rate.
• Computing investment earnings, losses, and interest at the interest rate on the balance
of an individual’s account and proportionally allocating the earnings, losses, or interest
to individual accounts.
• If feasible, allowing an individual who is not an employee (such as a self-employed
individual) or who is an employee of an employer not covered by the program to opt
in to and contribute to the program.
The board could enter into intergovernmental agreements with departments of the state
government to further successful implementation and operation of the MSRSP, and, unless
otherwise prohibited, these departments would have to cooperate and share relevant data with
the SRSB as requested.
Private provider marketplace
The SRSB would have to establish and maintain a website to assist employers in identifying
private sector providers of retirement arrangements that would serve as an alternative to the
MSRSP.
Before the website becomes publicly accessible, the SRSB would have to publish notice of its
availability and of the process for a private sector provider to be included on the website. The
board would also have to make the website available to the public before opening the MSRSP
for enrollment, and the website address would have to be included on any website posting or
other MSRSP materials offered to the public.
The SRSB would have to review the performance of any listed investment vendor at least once
every four years.
Information packets
Before opening the MSRSP for enrollment, the SRSB would have to design information
packets for both employers and employees that include background information on the
program, appropriate disclosures, and website information for any established vendors. 8
The employee information packet would have to include a form that is available electronically
and allows an employee to note their decision to opt out of the program or to participate in a
contribution level other than an automatic escalation. It would also have to include a disclosure
form that informs employees of the following:
• The benefits and risks associated with making contributions to the MSRSP.
• How to make contributions to the program.
• How to opt out of the program.
7
The IRA contribution limit for 2024 is generally $7,000: https://www.irs.gov/newsroom/401k-limit-increases-to-
23000-for-2024-ira-limit-rises-to-7000.
8
The SRSB would determine the entity responsible for providing an employee information packet to employees once
an employer registers for the program.
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 • How to participate with a level of employee contributions other than an automatic
increase up to the SRSB-established maximum.
• The process for withdrawing retirement savings.
• How to obtain additional information about the programs.
• That employees seeking financial advice should contact financial advisors.
• That participating employers are not in a position to provide financial advice and are
not liable for decisions made by employees.
• That the MSRSP is not an employer-sponsored retirement program and is not
guaranteed by the state.
Implementation and enrollment
The program would generally have to be implemented within 24 months after the bi