2024 -- S 2045 AS AMENDED

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LC003596

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2024

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A N   A C T

RELATING TO PUBLIC FINANCE -- RHODE ISLAND RETIREMENT SAVINGS

PROGRAM ACT

     

     Introduced By: Senators Kallman, F. Lombardi, Ruggerio, Murray, Cano, Acosta,

     Date Introduced: January 12, 2024

     Referred To: Senate Finance

     (General Treasurer)

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) “Eligible employee” means a person age eighteen (18) years or older who is employed

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by an eligible or optional employer and has been employed for a period of not less than one hundred

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twenty (120) days. “Eligible employee” does not include:

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     (i) Any employee covered under the federal Railway Labor Act (45 U.S.C. §§ 151-164 and

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45 U.S.C §§ 181-188), or any employee engaged in interstate commerce not subject to the

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legislative powers of the state, except insofar as application of this chapter is authorized under the

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United States Constitution or laws of 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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     (2) “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 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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     (3) “IRA” means an individual retirement account or individual retirement annuity under

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26 U.S.C §§ 408 or 408A (the federal Internal Revenue Code).

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     (4) “Optional 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 municipal corporation, or any of the state’s units or

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instrumentalities, that has under five (5) employees.

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     (5) “Participating employer” means an eligible or optional employer that provides a payroll

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deposit 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 the RISavers retirement

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savings 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 established pursuant to the provisions of § 35-10-1.

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     35-23-3. 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 office of the general treasurer

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for the purpose of promoting greater retirement savings for Rhode Island private sector employees

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in a convenient, 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 shall be functionally implemented upon receipt of funds pursuant to the

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provisions of this chapter.

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     35-23-4. Investments.

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     (a) The office of the general treasurer may select an appropriate third-party administrator(s)

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for the program and shall adopt such plan, trust and/or custodial documents, with such features and

 

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attributes as the office of the general treasurer determines necessary or advisable in its discretion

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to effectuate the provisions of this chapter in accordance with the following:

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     (1) The office of the general treasurer may select one or more firm(s) or company(ies) to

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provide retirement program investments, program administration, and communication services to

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employees who participate in the retirement savings program. The program shall provide for

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appropriate long-term retirement-oriented investments and shall include investment options as

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determined by the state investment commission. In determining the firm(s) or the company(ies) to

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provide these services, the office of the general treasurer 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 office of the general treasurer and the commission as part of the selection

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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 third-party administrator(s) shall adopt a written statement of investment policy

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that includes a risk management and oversight program. The state investment commission shall

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

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meeting.

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     35-23-5. Payroll deduction.

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     The RISavers retirement savings program shall include, as determined by the office of the

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general treasurer, one or more payroll deduction IRA arrangements.

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     35-23-6. Powers of the office of the general treasurer.

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     (a) The office of the general treasurer shall have the power and authority to do all of the

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following:

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

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

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program;

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

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

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

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of the program;

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     (5) 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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     (6) Collaborate and cooperate with private financial institutions, service providers, and

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business, financial, trade, membership, and other organizations to the extent necessary or desirable

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for the effective and efficient design, implementation, and administration of the program and to

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maximize outreach to eligible or optional employers and eligible employees;

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     (7) 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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     (8) 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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     (9) 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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     (10) 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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     (11) Enter into intergovernmental agreements with any state agency to further the

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successful implementation and operation of the program and all such agencies and instrumentalities

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shall cooperate with the office of the general treasurer. All state agencies shall cooperate as

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requested by the program in the performance of its duties under this chapter, including, unless

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otherwise prohibited, the sharing of relevant data as the parties shall mutually agree;

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     (13) Make and enter into contracts, agreements, memoranda of understanding,

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arrangements, partnerships, or other arrangements to collaborate, cooperate, coordinate, contract,

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or combine resources, investments, or administrative functions with other governmental entities,

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including any states or their agencies or instrumentalities that maintain or are establishing

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retirement savings programs compatible with the program, including collective, common, or pooled

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investments with other funds of other states’ programs with which the assets of the program and

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trust are permitted by law to be collectively invested, to the extent necessary or desirable for the

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effective and efficient design, administration, and implementation of the program consistent with

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the purposes set forth in this title, including the purpose of achieving economies of scale and other

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efficiencies designed to minimize costs for the program and its participants; and

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     (14) Develop and implement an investment policy that defines the program’s investment

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objectives, consistent with the objectives of the program, and that provides for policies and

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procedures consistent with those investment objectives. The office of the general treasurer shall

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designate appropriate default investments that include a mix of asset classes, such as target date

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and balanced funds. The office of the general treasurer shall seek to minimize participant fees and

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expenses of investment and administration. The office of the general treasurer shall strive to design

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and implement investment options available to holders of accounts established as part of the

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program and other program features that are intended to achieve maximum possible income

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replacement balanced with an appropriate level of risk in an IRA-based environment consistent

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with the investment objectives under the policy. The investment options may encompass a range

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of risk and return opportunities and allow for a rate of return commensurate with an appropriate

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level of risk in view of the investment objectives under the policy. The menu of investment options

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shall be determined taking into account the nature and objectives of the program, the desirability

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(based on behavioral research findings) of limiting investment choices under the program to a

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reasonable number, and the extensive investment choices available to participants in the event that

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they roll over to an IRA outside the program.

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     (b) The office of the general treasurer shall adopt regulations it deems necessary to

 

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implement this chapter consistent with the Internal Revenue Code and regulations issued pursuant

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to that code to ensure that the program meets all criteria for federal tax-deferral or tax-exempt

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benefits, or both.

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     35-23-7. Additional authority of the office of the general treasurer.

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     In addition to the powers and authority granted to the office of the general treasurer

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pursuant to § 35-23-6, the office of the general treasurer shall have the power and authority to do

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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 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 or

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

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automatic deposit of those contributions and the participating employer provides a payroll deposit

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retirement savings arrangement to forward the employee contribution and related information to

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the program or its agents. This evaluation and process may include, but is not limited to, financial

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services companies and third-party administrators with the capability to receive and process

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employee information and contributions for payroll deposit retirement savings arrangements or

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other arrangements authorized 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; and

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     (9) Evaluate and establish the process by which an employee of an optional employer may

 

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enroll in and make contributions to the program.

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     35-23-8. Disclosure of information.

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

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the general treasurer shall design and disseminate to employers an employee information packet

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that shall also be made available in an electronic format. The packet shall include background

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information on the program 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 program or liable as a program 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 office of the general treasurer deems

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necessary to appropriately evidence the employee's understanding that they are choosing not to

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automatically deduct earnings 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 no later than one hundred twenty (120) days after hiring. All new employees shall

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review the packet and acknowledge 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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     35-23-9. Employer participation.

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     (a) After the office of the general treasurer opens the RISavers retirement savings program

 

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for enrollment, eligible employers shall have a payroll deposit retirement savings arrangement to

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allow employee participation in the program under the terms and conditions prescribed by the office

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of the general treasurer.

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     (b) Within twelve (12) months after the office of the general treasurer opens the program

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for enrollment, eligible employers with more than one hundred (100) eligible employees and that

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do not offer a retirement savings program pursuant to subsection (g) of this section shall have a

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payroll deposit retirement savings arrangement to allow employee participation in the program.

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     (c) Within twenty-four (24) months after the office of the general treasurer opens the

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program for enrollment, eligible employers with more than fifty (50) eligible employees and that

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do not offer a retirement savings program pursuant to subsection (g) of this section shall have a

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payroll deposit retirement savings arrangement to allow employee participation in the program.

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     (d) Within thirty-six (36) months after the office of the general treasurer opens the

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program for enrollment, all other eligible employers that do not offer a retirement savings program

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

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arrangement to allow employee participation in the program.

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     (e) The office of the general treasurer, in its discretion, may extend the time limits defined

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in subsections (b) 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 office of the general treasurer shall designate an open enrollment period during

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which eligible employees 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 elects 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)(1) Following initial implementation of the program pursuant to this section, and at least

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once every year, the general treasurer shall designate an open enrollment period during which

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optional employers may enroll in the program.

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     (2) An optional employer that enrolls in the program may elect to opt out of the program

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upon thirty (30) days’ notice provided to employees and to the office of the general treasurer.

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     (i) By regulation, the office of the general treasurer may set a default contribution rate,

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unless otherwise specified by the employee. Employees shall have the ability to change their

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contribution rate at any time with thirty (30) days’ notice provided to the office of the general

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treasurer.

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     35-23-10. 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 program 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 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 office of the general treasurer

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defining the roles and responsibilities of employers that have a payroll deposit retirement savings

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arrangement to allow employee participation in the program.

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     35-23-11. 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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     35-23-12. Annual audited financial report.

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     (a) The office of the general treasurer shall submit, no later than December 31 annually, an

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audited financial report, prepared in accordance with generally accepted accounting principles, on

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the operations of the Rhode Island secure choice retirement savings program to the governor, and

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the finance committees of the house and senate. The annual audit shall be made by an independent

 

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certified public accountant and shall include, but not be limited to, direct and indirect costs

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attributable to the use of outside consultants, independent contractors, and any other persons who

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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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office of the general treasurer:

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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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     35-23-13. Required favorable federal tax treatment.

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     (a) The office of the general treasurer shall not implement the program if the IRA

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arrangements offered fail to qualify for the favorable federal income tax treatment ordinarily

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accorded to IRAs under the Internal Revenue Code, or if it is determined that the program is an

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employee benefit plan under the federal Employee Retirement Income Security Act.

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     (b) Prior to opening the program for enrollment, the office of the general treasurer shall

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report to the governor and the finance committees of the house and senate the specific date on

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which the program will start to enroll program participants and that the following prerequisites and

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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

24

Revenue Code;

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     (3) The office of the general treasurer has defined in regulation the roles and responsibilities

26

of employers in a manner to keep the program from being classified as an employee benefit plan

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subject to the federal Employee Retirement Income Security Act; and

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     (4) The office of the general treasurer has adopted a third-party administrator operational

29

model that limits employer interaction and transactions with the employee to the extent feasible.

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     35-23-14. Duties of the office of the general treasurer.

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     The office of the general treasurer, commission, and the program administrator and staff,

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including, contract administrators and consultants, shall discharge their duties as fiduciaries with

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

34

defraying reasonable expenses of administering the program.

 

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     35-23-15. Penalties.

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     (a) The office of the general treasurer shall have the power and duties necessary to

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administer the enforcement of employer compliance with this chapter, including the ability to

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impose penalties.

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     (b)(1) The office of the general treasurer shall issue a notice of noncompliance to each

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employer that fails to allow its eligible employees to participate in the Rhode Island secure choice

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savings retirement program pursuant to this title.

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     (2) 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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     (c) The department of labor and training shall assist the office of the general treasurer in

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its enforcement of this chapter.

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     35-23-16. Rules and regulations.

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     The office of the general treasurer may adopt rules and regulations to implement this

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chapter.

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     35-23-17. 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

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

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     35-23-18. Liberal Construction.

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

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

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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 RETIREMENT SAVINGS

PROGRAM ACT

***

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

2

administered by the general treasurer, which shall promote greater retirement savings for Rhode

3

Island private sector employees in a convenient, voluntary, low-cost, and portable manner. The

4

general treasurer would be charged with collecting contributions through payroll deductions and

5

investing these funds in accordance with best practice for retirement savings vehicles. The general

6

treasurer would also be responsible for encouraging employee participation and ensuring ease of

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administration for participating employers and portability of retirement benefits for participating

8

employees. The act would become effective for all eligible employers within thirty-six (36) months

9

of the general treasurer opening the program enrollment following a phased implementation period.

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     This act would take effect upon passage.

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