This bill enacts the "Tennessee Retirement Savings Plan Act," which creates the Tennessee retirement savings board, administratively attached to the department of treasury, to develop a defined contribution plan for Tennessee residents who are employed for compensation in this state, to conduct a market and legal analysis of the plan, and to coordinate with the efforts of other states as those states pursue legal guidance for similar retirement savings programs.
Under this bill, the board consists of the following members:
(1) The state treasurer or the treasurer's designee, to serve as the chair;
(2) A representative of employers, appointed by the governor;
(3) A representative with experience in the field of investments, appointed by the governor;
(4) A representative of an association representing employees, appointed by the governor;
(5) A member of the public who is retired, appointed by the governor;
(6) A member of the senate, appointed by the speaker of the senate, to be a nonvoting advisory member of the board; and
(7) A member of the house of representatives, appointed by the speaker of the house of the representatives, to be a nonvoting advisory member of the board.
This bill requires the governor, and the speakers of the senate and the house of representatives, to first make appointments to the board for terms beginning on January 1, 2024. The initial terms for governor appointees range from one to four years, with subsequent appointees' terms being four years. Members are eligible for reappointment and serve at the pleasure of the governor. If there is a vacancy, this bill requires the governor to make an appointment to become immediately effective for the unexpired term. For legislative members, this bill provides that such members serve at the pleasure of the appointing speaker and may serve as long as the member remains in the chamber of the general assembly from which the member was appointed.
Under this bill, a majority of the voting members of the board constitutes a quorum for the transaction of business. The members of the board who are not governmental employees or public officials will be paid $75 for attending the board meetings, and all members are entitled to reimbursement for travel and other expenses incurred in performance of their official duties.
Under this bill, the board is granted the following powers:
(1) To establish, implement, and maintain the plan developed;
(2) To promulgate rules as are necessary to carry out the Act;
(3) To direct the investment of the funds contributed to accounts in the plan consistent with the investment restrictions established by the board;
(4) To collect application, account, or administrative fees to defray the costs of administering the plan;
(5) To make or enter into contracts or agreements with certain entities as necessary to carry out the duties and responsibilities under the Act and the plan established by the board, with all expenses and fees incidental to the services being charged to and paid from participant accounts;
(6) To evaluate the need for, and procure as needed, pooled private insurance of the plan;
(7) To develop and implement an outreach plan to gain input and disseminate information regarding the plan and retirement savings in general; and
(8) To delegate to the state treasurer the day-to-day administration, operations, and responsibilities of the plan.
This bill requires the board to establish the retirement plan so that individuals may begin making contributions to the plan no later than January 1, 2026. But, if the board determines that a plan developed under this bill would qualify as an employee benefit plan under ERISA, then this bill prohibits the board from establishing the plan.
Before establishing the plan, this bill requires the board:
(1) To conduct a market analysis to determine the feasibility of the plan and whether and to what extent plans with the described characteristics currently exist in the private market;
(2) To obtain legal advice regarding the applicability of ERISA and the Internal Revenue Code to the plan;
(3) To investigate whether employers that are not required to participate in the plan can make the plan available to their employees;
(4) To investigate whether individuals who are self-employed as independent contractors can participate in the plan; and
(5) To investigate how to allow individuals who are not automatically enrolled in the plan to opt in to the plan and make contributions to an account, either through payroll contributions or another method of contribution.
This bill requires the board to report to the finance, ways and means committees of the house of representatives and the senate for the first time by July 1, 2024. The report must include the results of the market analysis; the findings from legal advice obtained by the board; an analysis of potential costs to employers associated with providing automatic payroll deductions for participation in the plan and recommendations on how to eliminate or reduce the costs through incentives, tax credits, or other means; a draft of the request for proposals to solicit bids from plan administrators; a timeline for implementation of the plan; an overview of any contracts entered into by the board in the performance of its duties; and recommendations to the general assembly regarding ways to increase financial literacy in the state. This bill then requires the board to report no later than February 1, each year, to the governor and to the finance, ways and means committees of the house of representatives and the senate detailing their activities.
This bill requires the plan developed by the board:
(1) To allow eligible individuals to contribute to the account established through payroll deduction;
(2) To require an employer with more than five employees to offer its employees the opportunity to contribute to the plan through payroll deductions, unless the employer offers a qualified retirement under the Internal Revenue Code;
(3) To provide automatic enrollment of employees and allow employees to opt out;
(4) To have a default contribution rate of 5 percent of wages or salary;
(5) To offer default escalation of contribution levels that can be increased or decreased within the limits allowed by the Internal Revenue Code;
(6) To provide for contributions to the plan to be deposited directly with the investment administrator for the plan;
(7) To use existing employer and public infrastructure to facilitate contributions to the plan, recordkeeping, and outreach;
(8) To require no employer contributions to employee accounts;
(9) To require the maintenance of separate records and accounting for each plan account;
(10) To provide for reports on the status of plan accounts to be provided to plan participants at least annually;
(11) To allow for account owners to maintain an account regardless of place of employment and to roll over funds into other retirement accounts;
(12) To pool accounts established under the plan for investment;
(13) To be professionally managed;
(14) To provide that the state of Tennessee and employers that participate in the plan have no proprietary interest in the contributions to or earnings on amounts contributed to accounts established under the plan;
(15) To provide that the investment administrator for the plan is the trustee of all contributions and earnings on amounts contributed to accounts established under the plan;
(16) To not impose any duties under ERISA on employers;
(17) To keep administration fees in the plan low;
(18) To allow the use of private sector partnerships to administer and invest the contributions to the plan under the supervision and guidance of the board; and
(19) To allow employers to establish an alternative retirement plan for some or all employees.
This bill further prohibits the plan, the board, each board member, and the state of Tennessee from guaranteeing any rate of return or any interest rate on any contribution. This bill also provides that the plan, the board, each board member, and the state of Tennessee are not liable for any loss incurred as a result of participating in the plan.
The bill sets out different timelines for when employees are eligible to participate in the plan, based on the size of the private employer, with the earliest date being January 1, 2026. This bill requires employers to register with the board prior to their participation so the board can determine whether the employer is required to participate in the plan.
The board must adopt rules that:
(1) Establish the process for voluntary enrollment in the plan, including procedures for automatic enrollment of employees and for employees to opt out;
(2) Establish the process for participants to make the default contributions to plan accounts and to adjust the contribution levels;
(3) Establish the process for employers to withhold employee contributions to plan accounts from employees' wages and send the contributions to the investment administrator of the plan;
(4) Establish the process for allowing employees to opt out of enrollment in the plan;
(5) Set minimum, maximum, and default contribution levels in accordance with limits established by the Internal Revenue Code;
(6) Establish the process for withdrawals from the plan accounts;
(7) Establish the process and requirements for an employer to obtain an exemption from offering the plan if the employer offers a qualified retirement plan; and
(8) Mandate the contents and frequency of required disclosures to employees, employers, and other plan participants.
This bill prohibits the state from disclosing personal information, such as social security numbers, bank account numbers, routing numbers, credit card numbers, business or residential addresses, phone numbers, email addresses, and amounts contributed, about a participant or beneficiary of the participant, unless otherwise required by law or under the following circumstances:
(1) To an individual or entity authorized by the respective participant or beneficiary;
(2) In compliance with a subpoena or a court order;
(3) To the comptroller of the treasury or the comptroller's designee for the purpose of an audit;
(4) To the internal revenue service or the United States department of treasury;
(5) To the participant's employer as may be necessary to administer the plan; or
(6) In an administrative proceeding or court action involving the state, the department of treasury, the state treasurer, or the board relative to an account established under this Act.
Unless contrary to other law or to this Act, this bill provides that all assets, income, and distributions of the plan are protected against the claims of creditors of the state, plan administrator, and plan participants, and are not subject to execution, attachment, garnishment, the operation of bankruptcy, the insolvency laws, or other processes. This bill authorizes the board to adopt rules to permit the plan to honor claims under a qualified domestic relations order, but such an order can only relate to the provision of marital property rights relating to the plan for the benefit of a participant's former spouse.
This bill creates the Tennessee retirement savings plan administrative fund in the state treasury, separate and distinct from the general fund, to pay the administrative costs and expenses of the board. This bill requires interest earned by the plan's administrative fund to be credited to the fund and moneys in the fund to be continuously appropriated by the board. The administrative fund consists of:
(1) Moneys appropriated by the general assembly;
(2) Moneys transferred to the fund from the federal government, other state agencies, or local governments;
(3) Moneys from the payment of fees and the payment of other moneys due the board;
(4) Any gifts or donations made to the state of Tennessee for deposit in the fund; and
(5) Earnings on moneys in the fund.
This bill prohibits a local government from establishing or offering a retirement plan for persons not employed by a governmental entity. However, this bill authorizes local governments to continue to offer retirement plans to certain independent contractors. This bill defines a "local government" as a Tennessee local governmental entity, including, but not limited to, a municipality, metropolitan government, county, utility district, school district, public building authority, and development district created and existing pursuant to the laws of this state, or an instrumentality of government created by one of the aforementioned entities or by an act of the general assembly.
This bill requires each state agency that enters into an interagency agreement with the board to provide outreach, technical support, or compliance services to collaborate with other state agencies to develop a plan to provide these services to the board by July 1, 2024.Statutes affected:
Introduced: 4-29-246(a), 4-29-246