What’s Going on in the States?

This new feature in the NTSA Advisor provides a look at what’s going on in the states and the most recent developments in their activity to provide and enhance retirement plan coverage.

New Utah Law Modifies Match of State Retirement System Employee Contributions

 

A bill signed into law by Utah Gov. Spencer J. Cox (R) on March 20 modifies the employer match of employee contributions to a retirement savings account under the Utah Retirement Systems. But does the program go far enough?

Utah Retirement Systems coverage includes employees of public school districts and public schools. The benefits include IRAs, 457(b)s, and 401(k)s and other similar employee benefits. 

What the New Law Does. SB 89 requires an employer to automatically enroll a newly hired benefit-eligible state employee to make a biweekly contribution to a Utah Retirement Systems retirement savings account in an amount equal to the amount that is eligible for an employer match. 

Employee role. The measure also allows an employee to modify the automatic enrollment, including:

• opting out of automatic enrollment;
• changing the amount of a contribution; or
• changing the Utah Retirement Systems retirement savings account into which the contribution is made.

If an employee opts to make a personal contribution for less than the amount originally set, he or she shall receive a partial contribution that is equal to the amount they have chosen to contribute.

Application. The new law applies to qualifying employees hired on or after July 1, 2023.

It’s a Start, BUT…

 

The measure enhances a program that gives state employees retirement plan coverage. But NTSA Executive Director Nathan Glassey suggests that more can be done. 

“The issue is that the other plans are not sponsored by the Board,” Glassey elaborated. “It is a start, but doesn’t go far enough.” He continues, “I am torn on this program, because it has a match alongside the auto-enroll, but it still limits choice and teachers’ access to an advisor.”

“Overall, it is a great direction,” says Glassey; however, he added the caveat that it still leaves gaps.

North Carolina Work and Save on the Table

 

Add the Tar Heel State to the list of those offering a state-run plan that picks up the slack left by employers that don’t offer a retirement plan. Well, if a new bill just introduced is passed and enacted, that is.  

HB 496 would create the North Carolina Small Business Retirement Savings Program, or North Carolina Work and Save, for short. Rep. Jarrod Lowery (R-Lumberton) introduced the bill on March 29. 

Why. The preamble set the reasoning behind the bill, saying the General Assembly: 

“finds that too many North Carolina citizens have no or inadequate savings for retirement” and that and “an estimated 1.7 million North Carolina working  families — including employees, independent contractors, and the self-employed — have no access to an employer-sponsored retirement plan or program or any other easy way to save at work.” It continues, “It is the policy of the state to assist the North Carolina private-sector workforce, including in particular moderate- and lower-income working households, to voluntarily save for retirement, including by facilitating saving in individual retirement accounts (IRAs) as well as by encouraging employers to adopt retirement savings and other retirement plans for employees in the state.” 

The preamble goes on to argue that: 

“More adequate, portable, low-cost, and consumer-protective retirement saving by North Carolina households will enhance their retirement security,” and suggests that building their retirement savings will be good for the state as well, as it will “ultimately reduce the pressure on state public assistance programs for retirees and other elderly citizens and the potential burden on North Carolina taxpayers to finance such programs.” 

About the Program. North Carolina Work and Save would be a payroll deduction retirement savings program for covered employers. Employees’ payroll deductions would be made into a Roth IRA with a target date fund investment; however, the Board could add an option for participants to choose to contribute to a traditional IRA instead. The contribution rate would begin at 5% of salary or wages.

Employees. The bill provides that covered employees could: 

• choose to stop participating;
• use a traditional IRA and a different investment  from among the options available;
• adjust the contribution rate higher or lower, subject to the IRA contribution dollar limits applicable under the Internal Revenue Code; and 
• make non-payroll contributions into an account in addition to the covered employer payroll deducted amounts.

The following employees would not participate:

• any employee covered under the federal Railway Labor Act; 
• any employee on whose behalf an employer makes contributions to a Taft-Hartley multiemployer pension trust fund; and
• any individual who is an employee of the federal government, North Carolina, or any other state, any county or municipal corporation, or any units or instrumentalities of North Carolina, another state, or the federal government. 

Covered Employers. The employers covered by the program would include a person or entity engaged in a business, industry, profession, trade, or other enterprise in North Carolina, whether for profit or not for profit. Covered employers would not include:

• the federal government;
• the state or any county, municipality, or other political subdivision; nor
• an employer that maintains a specified tax-favored retirement plan for its employees or has done so effective in form and operation at any time within the current or two preceding calendar years.

And if an employer does not maintain a specified tax-favored retirement plan for a portion of a calendar year ending on or after the effective date of the measure if it is enacted, but adopts such a plan effective for the remainder of that calendar year, the employer is not considered to be a covered employer for that remainder of the year.

North Carolina Small Business Retirement Savings Board. The bill would establish the North Carolina Small Business Retirement Savings Board as a part of the North Carolina Department of Commerce to have overall responsibility for the program. The Board would:

• establish the processes for enrollment and contributions; 
• establish the processes for withdrawals, rollovers, and direct transfers from IRAs under the Program to better facilitate portability and maximization of benefits;
• design, develop, implement, maintain, govern, and promulgate rules for the program;
• conduct market, legal, and feasibility analyses; 
• develop and implement an investment policy that defines the Program's investment objectives, consistent with its objectives and that provides for policies and procedures consistent with those investment objectives; and 
• designate appropriate default investments that include a mix of asset classes, such as target date and balanced funds.

The Board would have 12 members:

• The State Treasurer would appoint a member who has a favorable reputation for skill, knowledge, and experience in retirement investment products or retirement plan designs.
• The Governor would appoint five members as follows: 

1. one member who has a favorable reputation for skill, knowledge, and experience in retirement investment products or retirement plan designs;
2. one member who has a favorable reputation for skill, knowledge, and experience relating to small business or covered employers;
3. one member from the Office of State Budget and Management or other designee knowledgeable about fiscal impacts;
4. one member who is an employee of the Department of Commerce; and
5. one member of the public. 

• The General Assembly would appoint two members upon the recommendation of the Speaker of the House of Representatives: 

1. one who is a retired individual or an individual who represents persons retired, in order to represent retirees’ interests; and 
2. one who has a favorable reputation for skill, knowledge, and experience in the interests of employers regarding retirement saving.

• The General Assembly also would appoint two members appointed with the recommendation of the President Pro Tempore of the Senate: 

1. one who is a representative of an association representing employees or who has a favorable reputation for skill, knowledge, and experience in the interests of employees  in retirement saving; and  
2. one who has a favorable reputation for skill, knowledge, and experience in retirement investment products or retirement plan designs. 

• The President Pro Tempore of the Senate and the Speaker of the House of Representatives each would appoint one nonvoting advisory member.

Private-Sector Involvement. The preamble says that North Carolina Work and Save would “use the services of competent and qualified private-sector entities selected by the North Carolina Small Business Retirement Savings Program Board to administer the program and manage the funds on behalf of the program participants.” To support that proposal, it notes that “the North Carolina 529 College Savings Program has demonstrated the feasibility of a public-private partnership that outsources investment and administration to assist private citizens of the state to save on a voluntary and cost-efficient basis.”

Timing. The bill calls for the Board to establish the Program so that individuals can begin contributing not later than July 1, 2025.

Status. The bill has been referred to the Committee on Appropriations.