2022 -- H 8048

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LC005561

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2022

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A N   A C T

RELATING TO PUBLIC FINANCE -- RHODE ISLAND SECURE CHOICE RETIREMENT

SAVINGS PROGRAM ACT

     

     Introduced By: Representatives Williams, Giraldo, Batista, Diaz, Biah, Henries, Perez,
Felix, Barros, and Cassar

     Date Introduced: March 25, 2022

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 35 of the General Laws entitled "PUBLIC FINANCE" is hereby

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amended by adding thereto the following chapter:

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CHAPTER 23

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RHODE ISLAND SECURE CHOICE RETIREMENT SAVINGS PROGRAM ACT

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     35-23-1. Short title.

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     This chapter shall be known and may be cited as the "Rhode Island Secure Choice

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Retirement Savings Program Act."

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     35-23-2. Definitions.

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     As used in this chapter:

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     (1) "Board" means the Rhode Island secure choice retirement savings board.

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     (2) "Eligible employee" means a person age eighteen (18) or older who is employed by an

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eligible employer. "Eligible employee" does not include:

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     (i) Any employee covered under the federal Railway Labor Act (45 U.S.C. § 151), or any

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employee engaged in interstate commerce not subject to the legislative powers of the state, except

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insofar as application of this chapter is authorized under the United States Constitution or laws of

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the United States; or

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     (ii) Any employee on whose behalf an employer makes contributions to a Taft-Hartley

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pension trust fund.

 

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     (3) "Eligible employer" means a person or entity engaged in a business, industry,

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profession, trade, or other enterprise in the state, whether for-profit or not-for-profit, excluding the

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federal government, the state, any county, any municipal corporation, or any of the state's units or

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instrumentalities, that has five (5) or more employees and that satisfies the requirements to establish

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or participate in a payroll deposit retirement savings arrangement. "Eligible employer" does not

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include an employer that provides a tax-qualified retirement savings program as described in § 35-

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23-10.

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     (4) "IRA" means an individual retirement account or individual retirement annuity under

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Section 408(a), 408(b), or 408A of Title 26 of the United States Code (the federal Internal Revenue

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Code).

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     (5) "Participating employer" means an eligible employer that provides a payroll deposit

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retirement savings arrangement provided for by this chapter for eligible employees.

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     (6) "Payroll deposit retirement savings arrangement" means an arrangement by which an

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employer allows employees to remit payroll deduction contributions to RISavers retirement savings

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program.

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     (7) "RISavers retirement savings program" or "program" means a retirement savings

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program offered by the Rhode Island secure choice retirement savings program.

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     (8) "State investment commission" or "commission" means the state investment

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commission as defined in § 35-10-1.

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     35-23-3. Creation, membership, and terms of the Rhode Island secure choice

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retirement savings board.

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     (a) There is authorized, created, and established a public corporation of the state, having a

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distinct legal existence from the state and not constituting a department of the state government,

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with the politic and corporate powers set forth in this chapter, to be known as the Rhode Island

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secure choice retirement savings board (the "board"), to carry out the provisions of this chapter.

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The board is constituted as a public instrumentality and agency exercising public and essential

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governmental functions, and the exercise by the board of the powers conferred by this chapter shall

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be deemed and held to be the performance of an essential governmental function of the state.

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     (b) It is the intent of the general assembly by the passage of this chapter to create and

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establish a public corporation and instrumentality and agency of the state for the purpose of the

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activities authorized by this chapter, and to vest the corporation with all powers, authority, rights,

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privileges, and titles that may be necessary to enable it to accomplish those purposes. This chapter

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shall be liberally construed in conformance with the purpose expressed in this section.

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     (c) The powers of the corporation shall be vested in seven (7) members, consisting of the

 

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general treasurer, or designee, who shall act as chairperson; the director of the department of

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business regulation, or designee; two (2) members of the public to be appointed by the governor

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with advice and consent of the senate, one of whom shall serve for an initial term of two (2) years,

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and one of whom shall serve for an initial term of one year; an individual with small business

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administration experience to be appointed by the treasurer with the advice and consent of the senate,

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for an initial term of two (2) years; an individual with expertise in retirement planning to be

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appointed by the treasurer with the advice and consent of the senate, whom shall serve for an initial

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term of one year; and one member of the public to be appointed by the treasurer with advice and

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consent of the senate, whom shall serve for an initial term of two (2) years.

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     (d) After the initial term, all appointed members shall serve staggered three (3) year terms

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or until their respective successors are appointed and qualified after expiration of the appointed

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term.

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     (e) Any vacancy occurring in the office of a member by death, resignation, or otherwise

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shall be filled in the same manner as the original appointment.

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     (f) Members shall receive no compensation for the performance of their duties but may be

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reimbursed necessary expenses.

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     (g) The members of the board shall at regular intervals at least four (4) times a year conduct

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business meetings for the purpose of carrying out its general business. The board shall be

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considered a "public body" for purposes of, and shall be subject to, the provisions of chapter 46 of

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title 42 ("open meetings") and to the provisions of title 38 concerning public records.

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     (h) The board shall continue until its existence is terminated by law.

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     (i) The state shall indemnify and hold harmless every past, present, or future member,

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officer, or employee of the board who is made a party to or is required to testify in any action,

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investigation, or other proceeding in connection with or arising out of the performance or alleged

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lack of performance of that person's duties on behalf of the corporation. These persons shall be

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indemnified and held harmless, whether they are sued individually or in their capacities as

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members, officers, or employees of the board, for all expenses, legal fees and/or costs incurred by

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them during or resulting from the proceedings, and for any award or judgment arising out of their

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service to the corporation that is not paid by the board and is sought to be enforced against a person

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individually, as expenses, legal fees, costs, awards or judgments occur. Provided, however, that

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neither the state nor the corporation shall indemnify any member, officer, or employee:

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     (1) For acts or omissions not in good faith or which involve intentional misconduct or a

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knowing violation of law;

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     (2) For any transaction from which the member derived an improper personal benefit; or

 

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     (3) For any malicious act.

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     (j) No one shall be eligible for appointment unless they are a resident of the state.

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     35-23-4. Rhode Island secure choice retirement savings program.

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     (a) There is hereby established a retirement savings program known as the Rhode Island

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secure choice retirement savings program to be administered by the board for the purpose of

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promoting greater retirement savings for Rhode Island private sector employees in a convenient,

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voluntary, low-cost, and portable manner.

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     (b) The secure choice retirement savings program is a plan in which retirement savings are

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accumulated in individual accounts for the exclusive benefit of the participants or their

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beneficiaries. The program is established effective upon receipt of sufficient funds, at which time

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contributions by employees begin.

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     35-23-5. Investments.

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     (a) The board may select an appropriate third-party administrator for the program and shall

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adopt such plan, trust and/or custodial documents, with such features and attributes as the board

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determines necessary or advisable in its discretion to effectuate the provisions of this chapter in

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accordance with the following:

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     (1) The board may select one or more firm(s) or company(ies) to provide retirement

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program investments, program administration, and communication services to employees who

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participate in the retirement savings program. The program shall provide for appropriate long-term

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retirement-oriented investments and shall include investment options as determined by the state

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investment commission. In determining the firm or the company to provide these services, the

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board shall consider the following:

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     (i) The financial stability of the company or firm;

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     (ii) The cost of the investments, program administration, and services to the members;

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     (iii) The experience of the company or firm in administering retirement savings plans;

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     (iv) The experience of the company or firm in providing education, counseling, and advice

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to participants of retirement savings plans; and

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     (v) Any criminal convictions, securities or antitrust law violations, material civil or

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regulatory fines or judgments against the company or firm which the company or firm shall be

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required to disclose to the commission as part of the selection process.

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     (2) The program shall provide education, counseling, and objective employee-specific plan

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advice to participants.

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     (3) The program shall include a limited number of investment options which shall include

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either:

 

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     (i) Investment portfolio options that are constructed to reflect different risk profiles such

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as conservative, moderate and aggressive; and/or

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     (ii) Options constructed to reflect different risk profiles that automatically reallocate and

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rebalance contributions as an employee ages. There shall be investment options that prioritize the

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securities of companies that demonstrate good governance, efficient use of environmental resources

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and thoughtful management of social impact. All investment offerings shall be approved by the

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state investment commission.

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     (b) The Rhode Island secure choice retirement savings program is an instrumentality of the

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state. Any security issued, managed, or invested by the state investment commission within the

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Rhode Island secure choice retirement savings program on behalf of an individual participating

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within the RISavers retirement savings program shall be state income tax deferred for investment

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earnings to include interest, dividends and capital gains until such time as withdrawal pursuant to

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the terms of this chapter.

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     (c) The state investment commission shall adopt a written statement of investment policy

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that includes a risk management and oversight program. The commission shall consider the

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statement of investment policy and any changes in the investment policy at a public meeting.

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     35-23-6. Payroll deduction.

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     The RISavers retirement savings program shall include, as determined by the board, one

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or more payroll deduction IRA arrangements.

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     35-23-7. Powers of the board.

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     (a) The board shall have the power and authority to do all of the following:

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     (1) Adopt a seal and change and amend it from time to time;

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     (2) The treasurer shall, on behalf of the board, appoint an executive director, who shall not

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be a member of the board and who shall serve at the pleasure of the board. The treasurer shall

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determine the duties of the executive director and other staff as appropriate and set their

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compensation. The board may authorize the executive director to enter into contracts on behalf of

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the board or conduct any business necessary for the efficient operation of the board;

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     (3) Make provisions for the payment of costs of administration and operation of the

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program;

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     (4) Employ staff;

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     (5) Retain and contract with of a Rhode Island public retirement system, consultants,

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actuaries, counsel, auditors, and other professionals as necessary;

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     (6) Procure insurance against any loss in connection with the property, assets, or activities

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of the program;

 

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     (7) Procure insurance indemnifying each member of the board from personal loss or

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liability resulting from a member's action or inaction as a member of the board;

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     (8) Set minimum and maximum contribution levels in accordance with contribution limits

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set for IRAs by the Internal Revenue Code;

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     (9) Collaborate and cooperate with a public retirement system, private financial

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institutions, service providers, and business, financial, trade, membership, and other organizations

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to the extent necessary or desirable for the effective and efficient design, implementation, and

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administration of the program and to maximize outreach to eligible employers and eligible

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employees;

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     (10) Collaborate with, and evaluate the role of, licensed insurance agents and financial

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advisors in assisting and providing guidance for eligible employees;

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     (11) Cause expenses incurred to initiate, implement, maintain, and administer the program

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to be paid from contributions to, or investment returns or assets of, the program or arrangements

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established under the program, to the extent permitted under state and federal law;

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     (12) Facilitate compliance by the retirement savings program or arrangements established

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under the program with all applicable requirements for the program under the Internal Revenue

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Code of 1986, including tax qualification requirements or any other applicable law and accounting

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requirements, including providing or arranging for assistance to program sponsors and individuals

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in complying with applicable law and tax qualification requirements in a cost-effective manner;

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and

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     (13) Carry out the duties and obligations of the Rhode Island secure choice retirement

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savings program pursuant to this title and exercise any and all other powers as appropriate for the

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effectuation of the purposes, objectives, and provisions of this title pertaining to the program.

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     (b) The board shall adopt regulations it deems necessary to implement this chapter

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consistent with the Internal Revenue Code and regulations issued pursuant to that code to ensure

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that the program meets all criteria for federal tax-deferral or tax-exempt benefits, or both.

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     35-23-8. Additional authority of the board.

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     In addition to the powers and authority granted to the board pursuant to § 35-23-7, the

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board shall have the power and authority to do the following:

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     (1) Cause the retirement savings program or arrangements established under the program

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to be designed, established, and operated, in a manner consistent with all of the following:

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     (i) In accordance with best practices for retirement savings vehicles;

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     (ii) To encourage participation, saving, and sound investment practices; and

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     (iii) With simplicity, ease of administration for participating employers, and portability of

 

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benefits.

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     (2) Disseminate educational information designed to educate participants about the benefits

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of planning and saving for retirement and information to help them decide the level of RISavers

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retirement savings program participation and savings strategies that may be appropriate for them;

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     (3) Disseminate information concerning state and federal tax credits available to small

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business owners for allowing their employees to participate in the program, and any relevant state

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or federal tax credits available for participating employees;

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     (4) Submit progress and status reports to participating employers and eligible employees;

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     (5) If necessary, determine the eligibility of an employer, employee, or other individual to

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participate in the program;

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     (6) Evaluate and establish the process by which an eligible employee of an eligible

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employer is able to contribute a portion of their salary or wages to the program for automatic deposit

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of those contributions and the participating employer provides a payroll deposit retirement savings

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arrangement to forward the employee contribution and related information to the program or its

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agents. This evaluation and process may include, but is not limited to, financial services companies

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and third-party administrators with the capability to receive and process employee information and

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contributions for payroll deposit retirement savings arrangements or other arrangements authorized

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by this chapter;

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     (7) Design and establish the process for the enrollment of program participants;

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     (8) Allow participating employers to use the program to remit employees' contributions to

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their IRAs on their employees' behalf;

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     (9) Allow participating employers to make their own contributions to their employees'

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IRAs; provided that, the contributions would be permitted under the Internal Revenue Code and

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would not cause the program to be treated as an employee benefit plan under the federal Employee

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Retirement Income Security Act; and

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     (10) Evaluate and establish the process by which an individual or an employee of a

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nonparticipating employer may enroll in and make contributions to the program.

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     35-23-9. Disclosure of information.

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     (a) Prior to opening the RISavers retirement savings program for enrollment, the board

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shall design and disseminate to employers an employee information packet that shall also be made

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available in an electronic format. The packet shall include background information on the program

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and appropriate disclosures for employees.

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     (b) The disclosure form shall include, but not be limited to, all of the following:

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     (1) The benefits and risks associated with making contributions to the program;

 

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     (2) The mechanics of how to make contributions to the program;

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     (3) How to opt-out of the program;

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     (4) The process for withdrawal of retirement savings; and

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     (5) How to obtain additional information on the program.

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     (c) In addition, the disclosure form shall clearly articulate the following:

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     (1) Employees seeking financial advice should contact financial advisors in that employers

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do not provide financial advice, that employees are not to contact their employers for financial

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advice, and that employers are not liable for employee investment decisions;

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     (2) This retirement program is not sponsored by the employer, and therefore the employer

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is not responsible for the plan or liable as a plan sponsor; and

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     (3) The program fund is not guaranteed by the state.

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     (d) The disclosure form shall include a method for the employee to acknowledge that the

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employee has read all of the disclosures and understands their content.

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     (e) The employee information packet shall also include an opt-out form for an eligible

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employee to note their decision to opt-out of participation in the program. The opt-out form shall

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be simple and concise and drafted in a manner that the board deems necessary to appropriately

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evidence the employee's understanding that they are choosing not to automatically deduct earnings

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to save for retirement.

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     (f) The employee information packet with the disclosure and opt-out forms shall be made

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available to eligible employees by the RISavers retirement savings program and supplied to

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employees at the time of hiring. All new employees shall review the packet and acknowledge

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having received it.

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     (g) The employee information packet with the disclosure and opt-out forms shall be

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supplied to existing employees when the program is initially launched for a participating employer.

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     35-23-10. Employer participation.

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     (a) After the board opens the RISavers retirement savings program for enrollment, eligible

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employers shall have a payroll deposit retirement savings arrangement to allow employee

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participation in the program under the terms and conditions prescribed by the board.

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     (b) Within twelve (12) months after the board opens the program for enrollment, eligible

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employers with more than one hundred (100) eligible employees and that do not offer a retirement

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savings program pursuant to subsection (g) of this section shall have a payroll deposit retirement

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savings arrangement to allow employee participation in the program.

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     (c) Within twenty-four (24) months after the board opens the program for enrollment,

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eligible employers with more than fifty (50) eligible employees and that do not offer a retirement

 

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savings program pursuant to subsection (g) of this section shall have a payroll deposit retirement

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savings arrangement to allow employee participation in the program.

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     (d) Within thirty-six (36) months after the board opens the program for enrollment, all other

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eligible employers that do not offer a retirement savings program pursuant to subsection (g) of this

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section shall have a payroll deposit retirement savings arrangement to allow employee participation

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in the program.

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     (e) The board, in its discretion, may extend the time limits defined in subsections (b)

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through (d) of this section.

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     (f)(1) Each eligible employee shall be enrolled in the program unless the employee elects

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not to participate in the program. An eligible employee may elect to opt-out of the program at any

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time by making a notation on the opt-out form.

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     (2) Following initial implementation of the program pursuant to this section, at least once

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every year, the board shall designate an open enrollment period during which eligible employees

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that previously opted out of the program may enroll in the program.

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     (3) An employee who elects to opt-out of the program who subsequently wishes to

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participate through the employer's payroll deposit retirement savings arrangement may enroll at

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any time.

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     (g)(1) An employer that provides an employer-sponsored retirement plan, such as a defined

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benefit plan or a 401(k), 403(b), 457(b), Simplified Employee Pension (SEP) plan, or Savings

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Incentive, Match Plan for Employees (SIMPLE) plan, or that offers an automatic enrollment payroll

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deduction IRA, shall be exempt from the requirements of the RISavers retirement savings program,

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if the plan or IRA qualifies for favorable federal income tax treatment under the federal Internal

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Revenue Code.

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     (2) An employer shall retain the option at all times to set up and offer a tax-qualified

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retirement plan, instead of facilitating employee participation in the RISavers retirement savings

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program.

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     (h) By regulation, the board may set a default contribution rate which, unless otherwise

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specified by the employee, shall be the amount of the employee's annual salary or wages

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contributed to the program. Employees shall have the ability to elect to change their contribution

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rate at any time with thirty (30) days' notice provided to the program administrator.

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     (i) The board may implement annual automatic escalation of employee contributions.

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     (j) Employee contributions subject to automatic escalation shall not exceed eight percent

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(8%) of salary.

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     (2) Automatic escalation shall result in no more than a one percent (1%) of salary increase

 

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in employee contributions per calendar year.

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     (3) A participating employee may elect to opt-out of automatic escalation and may set his

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or her contribution percentage rate at a level determined by the participating employee.

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     35-23-11. Employer liability protection.

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     (a) Employers shall not have any liability for an employee's decision to participate in, or

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opt-out of, the RISavers retirement savings program, or for the investment decisions of employees

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whose assets are deposited in the program.

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     (b) Employers shall not be a fiduciary, or considered to be a fiduciary, over the Rhode

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Island secure choice retirement savings program. The program is a state-administered program, not

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an employer-sponsored program. If the program is subsequently found to be preempted by any

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federal law or regulation, employers shall not be liable as plan sponsors. An employer shall not

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bear responsibility for the administration, investment, or investment performance of the program.

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An employer shall not be liable with regard to investment returns, program design, and benefits

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paid to program participants.

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     (c) An employer's voluntary contribution pursuant to § 35-23-8(10) shall not in any way

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contradict the provisions of this section or change the employer's relationship to the program or an

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employer's obligations to employees.

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     (d) An employer shall not have civil liability, and no cause of action shall arise against an

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employer, for acting pursuant to the regulations prescribed by the board defining the roles and

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responsibilities of employers that have a payroll deposit retirement savings arrangement to allow

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employee participation in the program.

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     35-23-12. State immunity.

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     The state shall not have any liability for the payment of the retirement savings benefit

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earned by program participants pursuant to this chapter. The state, and any of the funds of the state,

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shall have no obligation for payment of the benefits arising from this chapter.

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     35-23-13. Annual audited financial report.

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     (a) The board shall submit no later than December 31 an annual audited financial report,

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prepared in accordance with generally accepted accounting principles, on the operations of the

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Rhode Island secure choice retirement savings program to the governor, and the legislature. The

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annual audit shall be made by an independent certified public accountant and shall include, but not

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be limited to, direct and indirect costs attributable to the use of outside consultants, independent

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contractors, and any other persons who are not state employees.

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     (b) The annual audit shall be supplemented by the following information prepared by the

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board:

 

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     (1) Any studies or evaluations prepared in the preceding year;

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     (2) A summary of the benefits provided by the program including the number of

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participants in the program; and

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     (3) Any other information that is relevant in order to make a full, fair, and effective

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disclosure of the operations of the Rhode Island secure choice retirement savings program.

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     35-23-14. Required favorable federal tax treatment.

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     (a) The board shall not implement the program if the IRA arrangements offered fail to

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qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the

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Internal Revenue Code, or if it is determined that the program is an employee benefit plan under

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the federal Employee Retirement Income Security Act.

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     (b) Prior to opening the program for enrollment, the board shall report to the governor and

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legislature the specific date on which the program will start to enroll program participants and that

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the following prerequisites and requirements for the program have been met:

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     (1) The program is structured in a manner to keep the program from being classified as an

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employee benefit plan subject to the federal Employee Retirement Income Security Act;

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     (2) The payroll deduction IRA arrangements offered by the program qualify for the

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favorable federal income tax treatment ordinarily accorded to IRA arrangements under the Internal

18

Revenue Code;

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     (3) The board has defined in regulation the roles and responsibilities of employers in a

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manner to keep the program from being classified as an employee benefit plan subject to the federal

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Employee Retirement Income Security Act; and

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     (4) The board has adopted a third-party administrator operational model that limits

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employer interaction and transactions with the employee to the extent feasible.

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     35-23-15. Prohibited conduct.

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     A board member, program administrator, and other staff of the board shall not do any of

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the following:

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     (1) Directly or indirectly have any interest in the making of any investment made for the

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program, or in the gains or profits accruing from any investment made for the program;

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     (2) Borrow any funds or deposits of the program, or use those funds or deposits in any

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manner, for themselves or as an agent or partner of others; or

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     (3) Become an endorser, surety, or obligor on investments by the board.

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     35-23-16. Duties of board and staff.

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     The board, commission, and the program administrator and staff, including contracted

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administrators and consultants, shall discharge their duties as fiduciaries with respect to the

 

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program for the exclusive purposes of providing benefits to program participants and defraying

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reasonable expenses of administering the program.

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     35-23-17. Penalties.

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     (a) The board shall have the power and duties necessary to administer the enforcement of

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employer compliance with this title including the ability to impose penalties.

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     (b) The board shall issue a notice of noncompliance to each employer that fails to allow its

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eligible employees to participate in the Rhode Island secure choice savings retirement program

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pursuant to this title.

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     (c) Each eligible employer that, without good cause, fails to allow its eligible employees

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to participate in the program within thirty (30) days from the date the notice of penalty was issued,

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shall be subject to a penalty of two hundred fifty dollars ($250) per eligible employee. Proceeds of

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such penalties, after deducting enforcement expenses, shall be deposited for the benefit of the

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program.

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     (d) The director of the department of labor and training shall assist the board in its

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enforcement of this chapter.

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     35-23-18. Rules and regulations.

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     (a) The board may adopt regulations to implement this chapter.

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     (b) The tax administrator in consultation with the board shall adopt rules and regulations

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regarding the reporting and the deferral of taxers in accordance with the provisions of this chapter.

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     35-23-19. Effect on benefit means test.

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     A payroll deposit IRA arrangement offered pursuant to the RISavers retirement savings

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program shall have the same status as, and be treated consistently with, any other IRA for the

23

purpose of determining eligibility or benefit level for a program that uses a means test.

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     35-23-20. Liberal construction.

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     This chapter shall be construed liberally in order to effectuate its purpose. The purposes of

26

this chapter and all of its provisions with respect to the powers granted shall be broadly interpreted

27

to effectuate that intent and purposes and not as to any limitation of powers.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC FINANCE -- RHODE ISLAND SECURE CHOICE RETIREMENT

SAVINGS PROGRAM ACT

***

1

     This act would establish the Rhode Island secure choice retirement savings program, which

2

provides for the creation of IRA-type retirement investments managed by a board established by

3

the act which would be a public corporation.

4

     This act would take effect upon passage.

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