Tennessee, Rhode Island Mull State Retirement Plans

Smoky Mountains, ocean shore. Disparate settings, but a common legislative thread — legislation is before the legislatures of Tennessee and Rhode Island that would add those states to those that provide a state-sponsored retirement plan for those whose employers do not. 

The Volunteer State

The Tennessee Retirement Savings Plan Act, which is before the Tennessee House of Representatives and Senate in identical bills, would create the Tennessee Retirement Savings Plan. HB0013 was introduced on Jan. 10, 2023, and was referred to the Government Operations Committee; SB0013 was introduced on Jan. 12, 2023, and was referred to that chamber’s Government Operations Committee. 

Features of the proposed Tennessee plan include the following. 

Employees. Employees of participating employers would be automatically enrolled in the plan and would participate through payroll deduction. The default contribution rate would be 5% of an employee’s wages or salary, but the bill would allow that rate to be adjusted.

Employee accounts would be portable: the legislation calls for account owners to maintain accounts regardless of where they work and to be able to roll the funds into other retirement accounts.

Employers. Through the plan, an employer with more than five employees and that does not already offer its employees a retirement plan would be required to give employees the opportunity to participate. Employers would:

• register with the plan before they participate in it so the Tennessee Retirement Savings Plan Board could determine whether the employer is required to participate in the plan; and
• deposit contributions to the plan directly with the investment administrator of the plan.

Employers would not make contributions out of their funds to employee accounts. They also would not be subject to ERISA. 

Funds Management. The bill would give the Tennessee Retirement Savings Plan Board the power to direct investment of the funds contributed to accounts, and to set investment restrictions. The legislation would allow the pooled accounts to be established for investment of the funds. The legislation also would allow the use private-sector partnerships to administer and invest contributions to the plan. 

Tennessee Retirement Savings Plan Board. The legislation would create the Tennessee Retirement Savings Plan Board to develop and administer the plan. The board would be part of the Tennessee Department of the Treasury. 

Effective Date. The legislation calls for the Tennessee Retirement Savings Plan Board to make the plan available for employees to begin making contributions by Jan. 1, 2026.

The Ocean State

House Bill 5417, which would establish the Rhode Island Secure Choice Savings Program, was introduced on Feb. 8, 2023. It was referred to the House Corporations Committee. 

Employers. Like the Tennessee legislation, the bill provides that an employer with more than five employees and that does not already offer its employees a retirement plan would be required to give employees the opportunity to participate. Also like the Tennessee measure, the Rhode Island bill provides that participating employers would not be required to contribute their own funds. 

Unlike the Tennessee legislation, however, the Rhode Island bill calls for eligible employers to be punished if they do not offer it; those that fail to do so would be fined $250 per employee. 

Employees. Employees would be automatically enrolled, but would be able to opt out. 

Accounts. Employee accounts would be payroll-deduction IRA arrangements. There will be automatic escalation of contributions to the plan, but participating employees may elect to opt out of automatic escalation and may set their own contribution percentage rates. 

Rhode Island Secure Choice Retirement Savings Board. The bill would create a Rhode Island Secure Choice Retirement Savings Board to develop and administer the program. 

Phased Implementation. Like the plans in California and Oregon, the Rhode Island plan would be phased in. 
Within 12 months after the board opens the program for enrollment, eligible employers with more than 100 eligible employees and that do not offer a retirement plan would be required to have a payroll deposit retirement savings arrangement to allow employee participation in the program. 

That applies to eligible employers with more than 50 eligible employees within 24 months after the board opens the program for enrollment, and to all other eligible employers within 36 months after the board opens the program for enrollment.