SF 185 (LSB 1503XS (6) 91)

SENATE FILE 185

BY  PETERSEN, DONAHUE, BISIGNANO, TRONE GARRIOTT, TOWNSEND, STAED, QUIRMBACH, WINCKLER, WEINER, DOTZLER, BLAKE, and BENNETT

A BILL FOR

An Act establishing a retirement savings plan trust, and including implementation provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  12L.1  Purpose and definitions.
   1.  The general assembly finds that the general welfare and well-being of the state are directly related to the ability of the citizens of the state to save for their retirement years, and that a vital and valid public purpose is served by the creation and implementation of programs which encourage and make possible the attainment of financial security by the greatest number of citizens of the state. According to a study conducted in 2019 by the Iowa insurance division in conjunction with other partners, thirty-nine percent of people in this state are relying on social security for retirement and thirty-seven percent have less than five thousand dollars saved or invested for retirement. In order to make available to the citizens of the state an opportunity to fund future retirement savings needs, it is necessary that a public trust be established in which moneys may be invested for retirement.
   2.  As used in this chapter, unless the context otherwise requires:
   a.  “Administrative fund” means the administrative fund established under section 12L.8.
   b.  “Employer” means a person or entity engaged in a business, industry, profession, trade, or other enterprise in Iowa.
   c.  “Internal Revenue Code” means the same as defined in section 422.3.
   d.  “Iowa retirement savings plan trust” or “trust” means the trust created under section 12L.2.
   e.  “Participant” means an individual that has entered into a participation agreement under this chapter to contribute to an Iowa retirement savings plan.
   f.  “Participation agreement” means an agreement between a participant and the Iowa retirement savings plan trust entered into under this chapter.
   g.  “Program fund” means the program fund established under section 12L.8.
    Sec. 2.  NEW SECTION.  12L.2  Creation of Iowa retirement savings plan trust.
   An Iowa retirement savings plan trust for persons employed for compensation in this state, as allowed by the Internal Revenue Code, is created for the purpose of helping Iowans save for retirement. The trust shall function according to the provisions of the federal SECURE 2.0 Act of 2022, Pub. L. No. 117-328. The treasurer of state is the trustee of the trust, and has all powers necessary to carry out and effectuate the purposes, objectives, and provisions of this chapter pertaining to the trust, including the power to do all of the following:
   1.  Make and enter into contracts necessary for the administration of the trust.
   2.  Enter into agreements with any financial institution, the state, or any federal or other state agency, or other entity as required to implement this chapter.
   3.  Carry out the duties and obligations of the trust pursuant to this chapter.
   4.  Accept any grants, gifts, legislative appropriations, and other moneys from the state, any unit of federal, state, or local government, or any other person, firm, partnership, or corporation which the treasurer of state shall deposit into the administrative fund or the program fund.
   5.  Carry out studies and projections so the treasurer of state may advise participants regarding present and estimated future retirement needs and levels of financial participation in the trust required in order to enable participants to achieve their retirement funding objectives.
   6.  Participate in any federal, state, or local governmental program for the benefit of the trust.
   7.  Procure insurance against any loss in connection with the property, assets, or activities of the trust.
   8.  Enter into agreements with participants and employers.
   9.  Make distributions and refunds to participants pursuant to participation agreements as prescribed by the Internal Revenue Code.
   10.  Invest moneys from the program fund in any investments which are determined by the treasurer of state to be appropriate.
   11.  Engage investment advisors, if necessary, to assist in the investment of trust assets.
   12.  Contract for goods and services and engage personnel as necessary, including consultants, actuaries, managers, legal counsel, and auditors, for the purpose of rendering professional, managerial, and technical assistance and advice to the treasurer of state regarding trust administration and operation.
   13.  Establish, impose, and collect administrative fees and charges in connection with transactions of the trust, and provide for reasonable service charges, including penalties for cancellations and late payments with respect to participation agreements.
   14.  Administer the funds of the trust.
   15.  Adopt rules pursuant to chapter 17A for the administration of the trust.
    Sec. 3.  NEW SECTION.  12L.3  Enrollment and contributions.
   1.  The treasurer of state shall automatically enroll an individual employed for compensation in this state, whose wages are subject to withholding by the state, in the Iowa retirement savings plan trust with a default contribution rate of five percent. A participant’s contribution rate shall be adjusted at the participant’s request. Participants shall be able to maintain an account regardless of place of employment and shall be able to roll over moneys into other retirement accounts. A participant may opt out of the trust at any time.
   2.  Participants shall deposit contributions to the trust directly with the treasurer of state. An individual employed for compensation in this state may contribute to the trust through payroll deductions. An employer need not offer its employees the opportunity to contribute to the trust through payroll deductions if the employer has fewer than five employees or offers a qualified retirement plan, including but not limited to a plan qualified under section 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b) of the Internal Revenue Code. Employer contributions to employee accounts are not required. An employer that participates in the trust shall have no proprietary interest in the contributions to or earnings on amounts contributed to accounts established under the trust.
    Sec. 4.  NEW SECTION.  12L.4  Participant reports.
   The treasurer of state shall provide reports on the status of trust accounts to participants at least annually.
    Sec. 5.  NEW SECTION.  12L.5  Confidentiality of account information.
   Except to the extent necessary to administer the Iowa retirement savings plan trust, a participant’s account information for accounts in the trust, including but not limited to names, addresses, telephone numbers, personal identification information, amounts contributed, and earnings on amounts contributed, is confidential. The treasurer of state shall maintain the information as confidential unless the person who provides the information or is the subject of the information expressly agrees in writing that the information may be disclosed.
    Sec. 6.  NEW SECTION.  12L.6  Preemption.
   A local government shall not establish or offer any retirement plan for persons other than public employees.
    Sec. 7.  NEW SECTION.  12L.7  Limitation of liability.
   The Iowa retirement savings plan trust, the treasurer of state, and the state of Iowa shall not guarantee any rate of return or any interest rate on any contribution to the trust. The trust, treasurer of state, and the state of Iowa are not liable for any loss incurred by any person as a result of participating in the trust.
    Sec. 8.  NEW SECTION.  12L.8  Program and administrative funds —— investment and payments.
   1.  The treasurer of state shall segregate moneys received by the Iowa retirement savings plan trust into two funds: the program fund and the administrative fund.
   2.  All moneys paid by participants in connection with participation agreements shall be deposited as received into separate accounts within the program fund.
   3.  Contributions to the trust made by participants shall only be made in the form of cash and shall be made pretax.
    Sec. 9.  NEW SECTION.  12L.9  Cancellation of agreements.
   A participant may cancel a participation agreement at will. Upon cancellation of a participation agreement, a participant shall be entitled to the return of the participant’s account balance subject to penalties prescribed by the Internal Revenue Code.
    Sec. 10.  NEW SECTION.  12L.10  Annual audited financial report.
   1.  The treasurer of state shall submit an annual audited financial report, prepared in accordance with generally accepted accounting principles, on the operations of the Iowa retirement savings plan trust by January 1 to the governor and the general assembly.
   2.  The annual audit shall be made either by the auditor of state or by an independent certified public accountant designated by the auditor of state and must include direct and indirect costs attributable to the use of outside consultants, independent contractors, and any other persons who are not state employees.
   3.  The annual audit must be supplemented by all of the following information prepared by the treasurer of state:
   a.  Any related studies or evaluations prepared in the preceding year.
   b.  A summary of the benefits provided by the trust, including the number of participants in the trust.
   c.  A list of the companies that are participating in the trust and the contributions the companies made.
   d.  Any other information which is relevant in order to make a full, fair, and effective disclosure of the operations of the trust.
    Sec. 11.  NEW SECTION.  12L.11  Tax considerations.
   For federal tax purposes, the Iowa retirement savings plan trust shall conform to the requirements established by the Internal Revenue Code to be able to operate as a retirement plan. The plan may conform to the requirements under section 401(a), section 408, or another section of the Internal Revenue Code which allows Iowans the best retirement option under the trust as determined by the treasurer of state.
    Sec. 12.  NEW SECTION.  12L.12  Property rights to assets in trust.
   1.  The assets of the Iowa retirement savings plan trust shall at all times be preserved, invested, and expended solely and only for the purposes of the trust and shall be held in trust for the participants.
   2.  No property rights in the trust shall exist in favor of the state.
   3.  The assets of the trust shall not be transferred or used by the state for any purposes other than the purposes of the trust.
    Sec. 13.  NEW SECTION.  12L.13  Exemption from execution and other process or assignment —— exceptions.
   The right of any person to any future payment under this chapter is not transferable or assignable, at law or in equity, and the moneys paid or payable or rights existing under this chapter are not subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law except for the purposes of enforcing child, spousal, or medical support obligations or marital property orders. For the purposes of enforcing child, spousal, or medical support obligations, the garnishment or attachment of or the execution against compensation due a person under this chapter shall not exceed the amount specified in 15 U.S.C. §1673(b).
    Sec. 14.  NEW SECTION.  12L.14  Construction.
   This chapter shall be construed liberally in order to effectuate its purpose.
    Sec. 15.  IMPLEMENTATION PROVISION.  The treasurer of state shall provide that when the requirements of chapter 12L are enacted, individuals may begin making contributions to the Iowa retirement savings plan trust, as created by section 12L.2, as enacted in this Act, no earlier than July 1, 2026.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill creates the Iowa retirement savings plan trust under the office of treasurer of state for the purpose of helping Iowans save for retirement. The bill provides that the trust be operated so that, for federal tax purposes, it meets the requirements of a retirement plan as provided by the Internal Revenue Code and functions according to other federal law.
   The state treasurer is the trustee of the trust and has numerous powers, as specified in the bill, for the purpose of carrying out the purpose of the trust. Powers granted the treasurer of state to effectuate the purpose of the trust include entering into agreements with trust participants and employers, investing moneys in the trust, and entering into any agreements or contracts necessary to carry out the purposes of the trust.
   The bill provides that individuals who are employed for compensation in this state and whose wages are subject to withholding by the state are automatically enrolled in the trust by the treasurer of state with a default contribution rate of 5 percent, which can be adjusted at the participant’s request. A participant may opt out of the trust at any time. Employers may allow employees to have their contributions deducted from their paychecks. Employer contributions to the trust are not required, and if an employer chooses to make contributions, the employer has no proprietary right to the moneys in the trust.
   The bill requires the treasurer of state to provide participants with reports on the trust fund at least once per year. The bill also requires that all participant account information be maintained as confidential, except as necessary to administer the trust or as agreed to in writing by the person who provides the information or is the subject of the information.
   The bill prohibits local governments from establishing or offering retirement plans for anyone other than public employees.
   The bill provides that the state, the treasurer of state, and the trust shall not guarantee any rate of return on any contributions to the trust and are not liable for any loss incurred by any person as a result of participating in the trust. The bill requires the treasurer to submit an annual audited financial report on the operations of the trust.
   The bill provides that when the requirements of the bill are enacted, the treasurer shall not allow individuals to make contributions to the trust earlier than July 1, 2026.