House File 2632 - Introduced HOUSE FILE 2632 BY BAETH , JAMES , NIELSEN , CAHILL , BROWN-POWERS , AMOS JR. , STAED , SCHEETZ , OLSON , MATSON , WILSON , CROKEN , ZABNER , STECKMAN , BAGNIEWSKI , FORBES , BUCK , JACOBY , KRESSIG , GAINES , EHLERT , KURTH , WESSEL-KROESCHELL , COOLING , SCHOLTEN , WILBURN , KONFRST , GJERDE , and LEVIN A BILL FOR An Act establishing a retirement savings plan trust, providing 1 penalties, and including implementation provisions. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5611YH (6) 90 sc/ns

H.F. 2632 Section 1. NEW SECTION . 12L.1 Purpose and definitions. 1 1. The general assembly finds that the general welfare and 2 well-being of the state are directly related to the ability 3 of the citizens of the state to save for their retirement 4 years, and that a vital and valid public purpose is served by 5 the creation and implementation of programs which encourage 6 and make possible the attainment of financial security by 7 the greatest number of citizens of the state. In order to 8 make available to the citizens of the state an opportunity to 9 fund future retirement savings needs, it is necessary that a 10 public trust be established in which moneys may be invested for 11 retirement. 12 2. As used in this chapter, unless the context otherwise 13 requires: 14 a. “Administrative fund” means the administrative fund 15 established under section 12L.10. 16 b. “ Employee” means an individual who is eighteen years of 17 age or older, who is employed by an employer for at least one 18 hundred twenty days, and who is employed for compensation in 19 this state. 20 c. “Employer” means a person or entity engaged in a 21 business, industry, profession, trade, or other enterprise 22 in Iowa for at least two years that employed five or more 23 employees at any time during the previous calendar year. 24 d. “Internal Revenue Code” means the same as defined in 25 section 422.3. 26 e. “Iowa retirement savings plan trust” or “trust” means the 27 trust created under section 12L.2. 28 f. “Participant” means an individual that has entered into a 29 participation agreement under this chapter to contribute to an 30 Iowa retirement savings plan. 31 g. “Participation agreement” means an agreement between a 32 participant and the trust entered into under this chapter. 33 h. “Program fund” means the program fund established under 34 section 12L.10. 35 -1- LSB 5611YH (6) 90 sc/ns 1/ 11

H.F. 2632 Sec. 2. NEW SECTION . 12L.2 Creation of the Iowa retirement 1 savings plan trust. 2 An Iowa retirement savings plan trust for persons employed 3 for compensation in this state, as allowed by the Internal 4 Revenue Code, is created for the purpose of helping Iowans 5 save for retirement. The treasurer of state is the trustee 6 of the trust, and has all powers necessary to carry out and 7 effectuate the purposes, objectives, and provisions of this 8 chapter pertaining to the trust, including the power to do all 9 of the following: 10 1. Make and enter into contracts necessary for the 11 administration of the trust. 12 2. Enter into agreements with any financial institution, 13 the state, or any federal or other state agency, or other 14 entity as required to implement this chapter. 15 3. Carry out the duties and obligations of the trust 16 pursuant to this chapter. 17 4. Accept any grants, gifts, legislative appropriations, 18 and other moneys from the state, any unit of federal, state, or 19 local government, or any other person, firm, partnership, or 20 corporation which the treasurer of state shall deposit into the 21 administrative fund or the program fund. 22 5. Carry out studies and projections so the treasurer of 23 state may advise participants regarding present and estimated 24 future retirement needs and levels of financial participation 25 in the trust required in order to enable participants to 26 achieve their retirement funding objectives. 27 6. Participate in any federal, state, or local governmental 28 program for the benefit of the trust. 29 7. Procure insurance against any loss in connection with the 30 property, assets, or activities of the trust. 31 8. Enter into agreements with participants and employers. 32 9. Make distributions and refunds to participants pursuant 33 to participation agreements as prescribed by the Internal 34 Revenue Code. 35 -2- LSB 5611YH (6) 90 sc/ns 2/ 11

H.F. 2632 10. Invest moneys from the program fund in any investments 1 which are determined by the treasurer of state to be 2 appropriate. 3 11. Engage investment advisors, if necessary, to assist in 4 the investment of trust assets. 5 12. Contract for goods and services and engage personnel 6 as necessary, including consultants, actuaries, managers, 7 legal counsel, and auditors, for the purpose of rendering 8 professional, managerial, and technical assistance and advice 9 to the treasurer of state regarding trust administration and 10 operation. 11 13. Establish, impose, and collect administrative fees 12 and charges in connection with transactions of the trust, and 13 provide for reasonable service charges, including penalties for 14 cancellations and late payments with respect to participation 15 agreements. 16 14. Administer the funds of the trust. 17 15. Design and establish the process for enrollment, 18 including the process by which an employee can opt out of the 19 trust, select a contribution level, and select an investment 20 option. 21 16. Set minimum, maximum, and default contribution rates 22 in accordance with limits established by the Internal Revenue 23 Code. 24 17. Facilitate education and outreach to employers and 25 employees. 26 18. Determine any nominal and reasonable assistance that 27 businesses may receive from moneys in the fund to offset the 28 initial costs of enrolling employees in the trust and complying 29 with implementation of the trust. 30 19. Adopt rules pursuant to chapter 17A for the 31 administration of the trust. 32 Sec. 3. NEW SECTION . 12L.3 Enrollment and contributions. 33 1. An employer shall establish a payroll deposit retirement 34 savings arrangement to allow employees to participate in the 35 -3- LSB 5611YH (6) 90 sc/ns 3/ 11

H.F. 2632 trust, automatically enroll in the trust each employee who 1 has not opted out of participation in the trust, and deposit 2 on behalf of a participating employee the money deducted 3 into the trust. An employer may at any time establish an 4 employer-sponsored retirement plan instead of participating in 5 the trust. 6 2. An employer shall automatically enroll a participant 7 with a default contribution rate set by the treasurer of state 8 so long as such contributions will not cause the participant’s 9 total contributions to individual retirement accounts for the 10 year to exceed the deductible amount for the participant’s 11 taxable year under section 219(b)(1)(A) of the Internal Revenue 12 Code. A participant may at any time opt out of the trust 13 or select an alternate level of contribution or an alternate 14 investment option from section 12L.4. 15 3. Following implementation of the trust, at least once 16 each year, a participating employer shall designate an open 17 enrollment period during which an employee who previously opted 18 out of the trust may enroll in the trust. 19 Sec. 4. NEW SECTION . 12L.4 Investment options. 20 1. The treasurer of state may establish a low-risk 21 investment portfolio and a target date fund as investment 22 options. 23 2. The target date fund is the default investment option for 24 a participant who fails to elect an investment option unless 25 the treasurer of state designates by rule a new investment 26 option as the default. In making the determination, the 27 treasurer of state shall consider the cost, risk profile, 28 benefit level, and ease of enrollment in the alternate 29 investment option. 30 Sec. 5. NEW SECTION . 12L.5 Employer and employee 31 information packets. 32 1. The treasurer of state shall design and disseminate 33 to employers an employer information packet and an employee 34 information packet, which must include background information 35 -4- LSB 5611YH (6) 90 sc/ns 4/ 11

H.F. 2632 on the trust and appropriate disclosures for employees. The 1 employee information packet must explain all of the following: 2 a. The benefits and risks associated with making 3 contributions to the trust. 4 b. The mechanics of how to make contributions to the trust. 5 c. How to opt out of the trust. 6 d. The process to withdraw retirement savings. 7 e. How to obtain additional information about the trust. 8 f. That an employee seeking financial advice should contact 9 a financial advisor, that a participating employer is not in a 10 position to provide financial advice, and that a participating 11 employer is not liable for decisions of an employee regarding 12 participation in the trust. 13 g. That the trust is not an employer-sponsored retirement 14 trust. 15 h. That investments are not guaranteed by the state. 16 i. Financial education information concerning the importance 17 of saving and planning for retirement. 18 j. Any other information deemed necessary by the treasurer 19 of state. 20 2. The employee information packet must include a form for 21 an employee to opt out of participation in the trust or elect 22 to participate with a contribution rate other than the default 23 contribution rate. 24 3. A participating employer shall supply the employee 25 information packet to an employee who is eligible for 26 participation in the trust. 27 Sec. 6. NEW SECTION . 12L.6 Fiduciary duty. 28 1. The treasurer of state, an agent of the treasurer 29 of state, and persons serving as staff for the trust shall 30 discharge their duties with respect to the trust solely in the 31 interest of the trust’s participants and beneficiaries for 32 the exclusive purposes of providing benefits to participants 33 and beneficiaries and defraying reasonable expenses of 34 administering the trust and by investing with the care, skill, 35 -5- LSB 5611YH (6) 90 sc/ns 5/ 11

H.F. 2632 prudence, and diligence under the prevailing circumstances that 1 a prudent person acting in a like capacity and familiar with 2 relevant matters would use in the conduct of an enterprise of a 3 like character and with like aims. 4 2. A participating employer is not a fiduciary of the trust 5 and is not liable with regard to investment returns, benefits 6 paid to a participant, an employee’s decision to participate 7 in the trust, or the investment decisions of the treasurer of 8 state or a participant. 9 Sec. 7. NEW SECTION . 12L.7 Participant reports. 10 1. The treasurer of state shall provide reports on the 11 status of trust accounts to participants at least annually. 12 2. The treasurer of state shall provide annual reports 13 to participating employers, including the name of each 14 participating employee of the employer and the contribution 15 amounts made by the employer. 16 Sec. 8. NEW SECTION . 12L.8 Confidentiality of account 17 information. 18 Except to the extent necessary to administer the trust, 19 a participant’s account information for accounts in the 20 trust, including but not limited to names, addresses, 21 telephone numbers, personal identification information, 22 amounts contributed, and earnings on amounts contributed, 23 is confidential. The treasurer of state shall maintain the 24 information as confidential unless the person who provides the 25 information or is the subject of the information expressly 26 agrees in writing that the information may be disclosed. 27 Sec. 9. NEW SECTION . 12L.9 Limitation of liability. 28 The trust, the treasurer of state, and the state of Iowa may 29 not guarantee any rate of return or any interest rate on any 30 contribution to the trust. The trust, treasurer of state, and 31 the state of Iowa are not liable for any loss incurred by any 32 person as a result of participating in the trust. 33 Sec. 10. NEW SECTION . 12L.10 Program and administrative 34 funds —— investment and payments. 35 -6- LSB 5611YH (6) 90 sc/ns 6/ 11

H.F. 2632 1. The treasurer of state shall segregate moneys received 1 by the trust into two funds: the program fund and the 2 administrative fund. 3 2. All moneys paid by participants in connection with 4 participation agreements shall be deposited as received into 5 separate accounts within the program fund. 6 3. Contributions to the trust made by participants shall 7 only be made in the form of cash. 8 Sec. 11. NEW SECTION . 12L.11 Cancellation of agreements. 9 A participant may cancel a participation agreement at will. 10 Upon cancellation of a participation agreement, a participant 11 shall be entitled to the return of the participant’s account 12 balance subject to penalties prescribed by the Internal Revenue 13 Code. 14 Sec. 12. NEW SECTION . 12L.12 Annual audited financial 15 report. 16 1. The treasurer of state shall submit an annual audited 17 financial report, prepared in accordance with generally 18 accepted accounting principles, on the operations of the trust 19 by January 1 to the governor and the general assembly. 20 2. The annual audit shall be made either by the auditor 21 of state or by an independent certified public accountant 22 designated by the auditor of state and must include direct and 23 indirect costs attributable to the use of outside consultants, 24 independent contractors, and any other persons who are not 25 state employees. 26 3. The annual audit must be supplemented by all of the 27 following information prepared by the treasurer of state: 28 a. Any related studies or evaluations prepared in the 29 preceding year. 30 b. A summary of the benefits provided by the trust, 31 including the number of participants in the trust. 32 c. Any other information which is relevant in order to make 33 a full, fair, and effective disclosure of the operations of the 34 trust. 35 -7- LSB 5611YH (6) 90 sc/ns 7/ 11

H.F. 2632 Sec. 13. NEW SECTION . 12L.13 Tax considerations. 1 For federal tax purposes, the Iowa retirement savings plan 2 trust shall conform to the requirements established by the 3 Internal Revenue Code to be able to operate as a retirement 4 plan. The plan may conform to the requirements under section 5 401(a), section 408, or another section of the Internal Revenue 6 Code which allows Iowans the best retirement option under the 7 trust as determined by the treasurer of state. 8 Sec. 14. NEW SECTION . 12L.14 Property rights to assets in 9 trust. 10 1. The assets of the trust shall at all times be preserved, 11 invested, and expended solely and only for the purposes of the 12 trust and shall be held in trust for the participants. 13 2. No property rights in the trust shall exist in favor of 14 the state. 15 3. The assets of the trust shall not be transferred or used 16 by the state for any purposes other than the purposes of the 17 trust. 18 Sec. 15. NEW SECTION . 12L.15 Interstate agreements. 19 The treasurer of state may enter into agreements with other 20 states for the cooperative or joint administration of the trust 21 if the treasurer of state finds that doing so will facilitate 22 the purposes of the trust. 23 Sec. 16. NEW SECTION . 12L.16 Penalties. 24 1. An employer who fails, without reasonable cause, to 25 enroll an employee in the trust shall receive a warning 26 for the initial offense. For subsequent violations, an 27 employer is subject to a civil penalty in an amount not to 28 exceed two hundred fifty dollars for each employee for each 29 calendar year or portion of a calendar year during which the 30 employee was neither enrolled in the trust nor had opted out 31 of participating in the trust. In determining the amount of 32 the penalty, the treasurer of state shall consider the number 33 and nature of the violations. Penalties collected under this 34 section shall be deposited in the general fund of the state. 35 -8- LSB 5611YH (6) 90 sc/ns 8/ 11

H.F. 2632 2. The treasurer of state shall develop a process for an 1 employee to report employer noncompliance with the provisions 2 of this chapter. An employer shall not take disciplinary 3 action or otherwise retaliate against an employee who makes a 4 report under this section. 5 Sec. 17. NEW SECTION . 12L.17 Construction. 6 This chapter shall be construed liberally in order to 7 effectuate its purpose. 8 Sec. 18. IMPLEMENTATION PROVISION. 9 1. The treasurer of state shall provide that when the 10 requirements of chapter 12L are enacted, individuals may begin 11 making contributions to the Iowa retirement savings plan trust, 12 as created by section 12L.2, as enacted in this Act, no earlier 13 than July 1, 2025. 14 2. For the first year of the trust’s operation, this Act 15 applies to an employer with one hundred or more employees at 16 any time during the previous calendar year. For the second 17 year of the trust’s operation, this Act applies to an employer 18 with fifty or more employees at any time during the previous 19 calendar year. For the third year of the trust’s operation and 20 for each year thereafter, this Act applies to an employer with 21 five or more employees at any time during the previous calendar 22 year as provided in chapter 12L. 23 3. a. An employer that employs one hundred or more 24 employees at any time during the calendar year preceding the 25 year in which the trust is operating shall establish a payroll 26 deposit retirement savings arrangement within nine months after 27 the implementation date of the trust. 28 b. An employer that employs fifty or more employees at any 29 time during the calendar year preceding the second year in 30 which the trust is operating shall establish a payroll deposit 31 retirement savings arrangement within one year and nine months 32 after the implementation date of the trust. 33 c. An employer that employs five or more employees at any 34 time during the calendar year preceding the third year in 35 -9- LSB 5611YH (6) 90 sc/ns 9/ 11

H.F. 2632 which the trust is operating shall establish a payroll deposit 1 retirement savings arrangement within two years and nine months 2 after the implementation date of the trust. 3 EXPLANATION 4 The inclusion of this explanation does not constitute agreement with 5 the explanation’s substance by the members of the general assembly. 6 This bill creates the Iowa retirement savings plan trust 7 under the office of treasurer of state for the purpose of 8 helping Iowans save for retirement. The bill provides that 9 the trust be operated so that, for federal tax purposes, it 10 meets the requirements of a retirement plan as provided by the 11 Internal Revenue Code. 12 The state treasurer is the trustee of the trust and has 13 numerous powers, as specified in the bill, for the purpose of 14 carrying out the purpose of the trust. Powers granted the 15 treasurer of state to effectuate the purpose of the trust 16 include entering into agreements with trust participants and 17 employers, investing moneys in the trust, and entering into any 18 agreements or contracts necessary to carry out the purposes of 19 the trust. 20 The bill provides that individuals who are employed for 21 compensation in this state must be automatically enrolled 22 in the trust by the individual’s employer with a default 23 contribution rate set by the treasurer of state. A participant 24 may opt out of the trust at any time and may at any time choose 25 a different contribution rate or investment option. The bill 26 requires employers to designate an open enrollment period for 27 the trust at least once per year. 28 The bill permits the treasurer of state to establish a 29 low-risk investment portfolio and a target date portfolio, 30 which is the default investment option. The treasurer of 31 state must distribute informational packets to employers and 32 employees about the trust and provide participating employers 33 and participants with reports on the trust fund at least once 34 per year. The bill also requires that all participant account 35 -10- LSB 5611YH (6) 90 sc/ns 10/ 11

H.F. 2632 information be maintained as confidential, except as necessary 1 to administer the trust or as agreed to in writing by the 2 person who provides the information or is the subject of the 3 information. 4 The bill allows the treasurer of state to enter into 5 agreements with other states for the administration of the 6 trust. 7 The bill creates civil penalties for employers who fail 8 to enroll an employee in the trust without reasonable cause, 9 enforced by the treasurer of state. A penalty shall not exceed 10 $250 for each employee that an employer fails to enroll each 11 year. Civil penalties collected under the bill are deposited 12 in the general fund of the state. 13 The bill provides that the state, the treasurer of state, 14 and the trust may not guarantee any rate of return on any 15 contributions to the trust and are not liable for any loss 16 incurred by any person as a result of participating in the 17 trust. The bill requires the treasurer to submit an annual 18 audited financial report on the operations of the trust. 19 The bill provides that when the requirements of the bill 20 are enacted, the treasurer shall not allow individuals to make 21 contributions to the trust earlier than July 1, 2025. During 22 the first year of the trust’s operation, the bill applies to 23 employers that employed 100 or more employees at any time 24 during the prior year. In the second year, the bill applies to 25 employers that employed 50 or more employees at any time during 26 the prior year. After the second year, the bill applies to all 27 employers with five or more employees during the prior calendar 28 year. 29 -11- LSB 5611YH (6) 90 sc/ns 11/ 11