House File 2373 - Introduced HOUSE FILE 2373 BY McBURNEY , B. MEYER , LEVIN , WILBURN , MATSON , BROWN-POWERS , AMOS JR. , WICHTENDAHL , WILSON , RAMIREZ , KRESSIG , MADISON , CROKEN , JACOBY , GJERDE , OLSON , GOSA , EHLERT , WESSEL-KROESCHELL , GAINES , SRINIVAS , BAGNIEWSKI , KURTH , and R. JOHNSON 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 5477YH (4) 91 sc/ns

H.F. 2373 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 residents 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 the 7 greatest number of residents of the state. In order to make 8 available to the residents 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 5477YH (4) 91 sc/ns 1/ 12

H.F. 2373 Sec. 2. NEW SECTION . 12L.2 Creation of 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 5477YH (4) 91 sc/ns 2/ 12

H.F. 2373 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 5477YH (4) 91 sc/ns 3/ 12

H.F. 2373 Iowa retirement savings plan trust, automatically enroll in the 1 trust each employee who has not opted out of participation in 2 the trust, and deposit on behalf of a participating employee 3 the money deducted into the trust. An employer may at any 4 time establish an employer-sponsored retirement plan instead 5 of participating in 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 5477YH (4) 91 sc/ns 4/ 12

H.F. 2373 on the Iowa retirement savings plan trust and appropriate 1 disclosures for employees. The employee information packet 2 must explain all of the following: 3 a. The benefits and risks associated with making 4 contributions to the trust. 5 b. The mechanics of how to make contributions to the trust. 6 c. How to opt out of the trust. 7 d. The process to withdraw retirement savings. 8 e. How to obtain additional information about the trust. 9 f. That an employee seeking financial advice should contact 10 a financial advisor, that a participating employer is not in a 11 position to provide financial advice, and that a participating 12 employer is not liable for decisions of an employee regarding 13 participation in the trust. 14 g. That the trust is not an employer-sponsored retirement 15 trust. 16 h. That investments are not guaranteed by the state. 17 i. Financial education information concerning the importance 18 of saving and planning for retirement. 19 j. Any other information deemed necessary by the treasurer 20 of state. 21 2. The employee information packet must include a form for 22 an employee to opt out of participation in the trust or elect 23 to participate with a contribution rate other than the default 24 contribution rate. 25 3. A participating employer shall supply the employee 26 information packet to an employee who is eligible for 27 participation in the trust. 28 Sec. 6. NEW SECTION . 12L.6 Fiduciary duty. 29 1. The treasurer of state, an agent of the treasurer of 30 state, and persons serving as staff for the Iowa retirement 31 savings plan trust shall discharge their duties with respect to 32 the trust solely in the interest of the trust’s participants 33 and beneficiaries for the exclusive purposes of providing 34 benefits to participants and beneficiaries and defraying 35 -5- LSB 5477YH (4) 91 sc/ns 5/ 12

H.F. 2373 reasonable expenses of administering the trust and by investing 1 with the care, skill, prudence, and diligence under the 2 prevailing circumstances that a prudent person acting in a like 3 capacity and familiar with relevant matters would use in the 4 conduct of an enterprise of a like character and with like 5 aims. 6 2. A participating employer is not a fiduciary of the trust 7 and is not liable with regard to investment returns, benefits 8 paid to a participant, an employee’s decision to participate 9 in the trust, or the investment decisions of the treasurer of 10 state or a participant. 11 Sec. 7. NEW SECTION . 12L.7 Participant reports. 12 1. The treasurer of state shall provide reports on the 13 status of trust accounts to participants at least annually. 14 2. The treasurer of state shall provide annual reports 15 to participating employers, including the name of each 16 participating employee of the employer and the contribution 17 amounts made by the employer. 18 Sec. 8. NEW SECTION . 12L.8 Confidentiality of account 19 information. 20 Except to the extent necessary to administer the Iowa 21 retirement savings plan trust, a participant’s account 22 information for accounts in the trust, including but not 23 limited to names, addresses, telephone numbers, personal 24 identification information, amounts contributed, and earnings 25 on amounts contributed, is confidential. The treasurer of 26 state shall maintain the information as confidential unless the 27 person who provides the information or is the subject of the 28 information expressly agrees in writing that the information 29 may be disclosed. 30 Sec. 9. NEW SECTION . 12L.9 Limitation of liability. 31 The Iowa retirement savings plan trust, the treasurer of 32 state, and the state of Iowa shall not guarantee any rate of 33 return or any interest rate on any contribution to the trust. 34 The trust, treasurer of state, and the state of Iowa are not 35 -6- LSB 5477YH (4) 91 sc/ns 6/ 12

H.F. 2373 liable for any loss incurred by any person as a result of 1 participating in the trust. 2 Sec. 10. NEW SECTION . 12L.10 Program and administrative 3 funds —— investment and payments. 4 1. The treasurer of state shall segregate moneys received 5 by the Iowa retirement savings plan trust into two funds: the 6 program fund and the administrative fund. 7 2. All moneys paid by participants in connection with 8 participation agreements shall be deposited as received into 9 separate accounts within the program fund. 10 3. Contributions to the trust made by participants shall 11 only be made in the form of cash. 12 Sec. 11. NEW SECTION . 12L.11 Cancellation of agreements. 13 A participant may cancel a participation agreement at will. 14 Upon cancellation of a participation agreement, a participant 15 shall be entitled to the return of the participant’s account 16 balance subject to penalties prescribed by the Internal Revenue 17 Code. 18 Sec. 12. NEW SECTION . 12L.12 Annual audited financial 19 report. 20 1. The treasurer of state shall submit an annual audited 21 financial report, prepared in accordance with generally 22 accepted accounting principles, on the operations of the Iowa 23 retirement savings plan trust by January 1 to the governor and 24 the general assembly. 25 2. The annual audit shall be made either by the auditor 26 of state or by an independent certified public accountant 27 designated by the auditor of state and must include direct and 28 indirect costs attributable to the use of outside consultants, 29 independent contractors, and any other persons who are not 30 state employees. 31 3. The annual audit must be supplemented by all of the 32 following information prepared by the treasurer of state: 33 a. Any related studies or evaluations prepared in the 34 preceding year. 35 -7- LSB 5477YH (4) 91 sc/ns 7/ 12

H.F. 2373 b. A summary of the benefits provided by the trust, 1 including the number of participants in the trust. 2 c. Any other information which is relevant in order to make 3 a full, fair, and effective disclosure of the operations of the 4 trust. 5 Sec. 13. NEW SECTION . 12L.13 Tax considerations. 6 For federal tax purposes, the Iowa retirement savings plan 7 trust shall conform to the requirements established by the 8 Internal Revenue Code to be able to operate as a retirement 9 plan. The plan may conform to the requirements under section 10 401(a), section 408, or another section of the Internal Revenue 11 Code which allows Iowans the best retirement option under the 12 trust as determined by the treasurer of state. 13 Sec. 14. NEW SECTION . 12L.14 Property rights to assets in 14 trust. 15 1. The assets of the Iowa retirement savings plan trust 16 shall at all times be preserved, invested, and expended solely 17 and only for the purposes of the trust and shall be held in 18 trust for the participants. 19 2. No property rights in the trust shall exist in favor of 20 the state. 21 3. The assets of the trust shall not be transferred or used 22 by the state for any purposes other than the purposes of the 23 trust. 24 Sec. 15. NEW SECTION . 12L.15 Interstate agreements. 25 The treasurer of state may enter into agreements with other 26 states for the cooperative or joint administration of the Iowa 27 retirement savings plan trust if the treasurer of state finds 28 that doing so will facilitate the purposes of the trust. 29 Sec. 16. NEW SECTION . 12L.16 Penalties. 30 1. An employer who fails, without reasonable cause, 31 to enroll an employee in the Iowa retirement savings plan 32 trust shall receive a warning for the initial offense. For 33 subsequent violations, an employer is subject to a civil 34 penalty in an amount not to exceed two hundred fifty dollars 35 -8- LSB 5477YH (4) 91 sc/ns 8/ 12

H.F. 2373 for each employee for each calendar year or portion of a 1 calendar year during which the employee was neither enrolled 2 in the trust nor had opted out of participating in the trust. 3 In determining the amount of the penalty, the treasurer of 4 state shall consider the number and nature of the violations. 5 Penalties collected under this section shall be deposited in 6 the general fund of the state. 7 2. The treasurer of state shall develop a process for an 8 employee to report employer noncompliance with the provisions 9 of this chapter. An employer shall not take disciplinary 10 action or otherwise retaliate against an employee who makes a 11 report under this section. 12 Sec. 17. NEW SECTION . 12L.17 Construction. 13 This chapter shall be construed liberally in order to 14 effectuate its purpose. 15 Sec. 18. IMPLEMENTATION PROVISION. 16 1. The treasurer of state shall provide that when the 17 requirements of chapter 12L are enacted, individuals may begin 18 making contributions to the Iowa retirement savings plan trust, 19 as created by section 12L.2, as enacted in this Act, no earlier 20 than July 1, 2027. 21 2. For the first year of the trust’s operation, this Act 22 applies to an employer with one hundred or more employees at 23 any time during the previous calendar year. For the second 24 year of the trust’s operation, this Act applies to an employer 25 with fifty or more employees at any time during the previous 26 calendar year. For the third year of the trust’s operation and 27 for each year thereafter, this Act applies to an employer with 28 five or more employees at any time during the previous calendar 29 year as provided in chapter 12L. 30 3. a. An employer that employs one hundred or more 31 employees at any time during the calendar year preceding the 32 year in which the trust is operating shall establish a payroll 33 deposit retirement savings arrangement within nine months after 34 the implementation date of the trust. 35 -9- LSB 5477YH (4) 91 sc/ns 9/ 12

H.F. 2373 b. An employer that employs fifty or more employees at any 1 time during the calendar year preceding the second year in 2 which the trust is operating shall establish a payroll deposit 3 retirement savings arrangement within one year and nine months 4 after the implementation date of the trust. 5 c. An employer that employs five or more employees at any 6 time during the calendar year preceding the third year in 7 which the trust is operating shall establish a payroll deposit 8 retirement savings arrangement within two years and nine months 9 after the implementation date of the trust. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill creates the Iowa retirement savings plan trust 14 under the office of treasurer of state for the purpose of 15 helping Iowans save for retirement. The bill provides that 16 the trust be operated so that, for federal tax purposes, it 17 meets the requirements of a retirement plan as provided by the 18 Internal Revenue Code. 19 The state treasurer is the trustee of the trust and has 20 numerous powers, as specified in the bill, for the purpose of 21 carrying out the purpose of the trust. Powers granted the 22 treasurer of state to effectuate the purpose of the trust 23 include entering into agreements with trust participants and 24 employers, investing moneys in the trust, and entering into any 25 agreements or contracts necessary to carry out the purposes of 26 the trust. 27 The bill provides that individuals who are employed for 28 compensation in this state must be automatically enrolled 29 in the trust by the individual’s employer with a default 30 contribution rate set by the treasurer of state. A participant 31 may opt out of the trust at any time and may at any time choose 32 a different contribution rate or investment option. The bill 33 requires employers to designate an open enrollment period for 34 the trust at least once per year. 35 -10- LSB 5477YH (4) 91 sc/ns 10/ 12

H.F. 2373 The bill permits the treasurer of state to establish a 1 low-risk investment portfolio and a target date portfolio, 2 which is the default investment option. The treasurer of 3 state must distribute informational packets to employers and 4 employees about the trust and provide participating employers 5 and participants with reports on the trust fund at least once 6 per year. The bill also requires that all participant account 7 information be maintained as confidential, except as necessary 8 to administer the trust or as agreed to in writing by the 9 person who provides the information or is the subject of the 10 information. 11 The bill allows the treasurer of state to enter into 12 agreements with other states for the administration of the 13 trust. 14 The bill creates civil penalties for employers who fail 15 to enroll an employee in the trust without reasonable cause, 16 enforced by the treasurer of state. A penalty shall not exceed 17 $250 for each employee that an employer fails to enroll each 18 year. Civil penalties collected under the bill are deposited 19 in the general fund of the state. 20 The bill provides that the state, the treasurer of state, 21 and the trust shall not guarantee any rate of return on any 22 contributions to the trust and are not liable for any loss 23 incurred by any person as a result of participating in the 24 trust. The bill requires the treasurer to submit an annual 25 audited financial report on the operations of the trust. 26 The bill provides that when the requirements of the bill 27 are enacted, the treasurer shall not allow individuals to make 28 contributions to the trust earlier than July 1, 2027. During 29 the first year of the trust’s operation, the bill applies to 30 employers that employed 100 or more employees at any time 31 during the prior year. In the second year, the bill applies to 32 employers that employed 50 or more employees at any time during 33 the prior year. After the second year, the bill applies to all 34 employers with five or more employees during the prior calendar 35 -11- LSB 5477YH (4) 91 sc/ns 11/ 12