More from our experts
Signed into law in 2023, the Minnesota Secure Choice Retirement Program is designed to go into effect no earlier than January 1, 2025. One of a growing number of state-mandated retirement plans in the works, Secure Choice was created to benefit employees in the private sector, including nonprofit organizations that currently do not have an employer retirement plan.
When active, the program will be a public-private partnership that offers state oversight, while employee funds are managed by a private financial management firm.
Fast Facts about the Minnesota Secure Choice Retirement Program
- Secure Choice is expected to go into effect sometime in 2025
- Employees can choose between a Roth IRA and a traditional IRA
- There is no cost for employers to participate
- Secure Choice is also open to self-employed individuals and sole proprietors
This employer’s guide summarizes what we know so far about Minnesota’s upcoming state-sponsored retirement program, the employers who will most likely want to familiarize themselves with it, and some dates to keep in mind.
Why are programs like Secure Choice picking up steam?
A recent AARP survey found that 20% of US adults ages 50+ have no retirement savings, while 61% are concerned that they do not have enough savings to live on when leaving the workforce. In recent years, states have begun to take steps to address this retirement crunch by enacting their own state-wide programs. In many cases, employer participation is required, though some states have left voluntary participation. In any case, these retirement savings programs are designed to help employees begin to save for retirement, usually through a Roth IRA.
Like many other states, hundreds of thousands of Minnesota employees lack access to a qualified retirement program through their current employer. The Minnesota Secure Choice Retirement Program is designed to help reduce that number by giving Minnesota workers direct access to a retirement plan. This allows employees to open a Roth IRA or traditional IRA and manage the account themselves.
As of September 2024, 19 states have either enacted retirement savings programs including California, Illinois and Virginia, or have them in development, such as New Mexico.
Now that we better understand why programs are gaining adoption, let’s share what we know about Minnesota’s plan.
What is the Minnesota Secure Choice Retirement Program?
In early 2023, HF 782; The Secure Choice Retirement Program Act, was introduced by Minnesota Senator Sandra Pappas and Representative Jamie Becker-Finn, and in May 2023, signed by Governor Tim Walz.
The Act would establish an automated savings program for the estimated 718,000 Minnesota workers who do not have access to a qualified retirement plan through their employer. For those wondering what the requirements will be, here are some details they can get familiar with:
- Employees would be able to choose a Roth IRA — which is the default account type — or opt for a traditional IRA
- All eligible employees would be automatically enrolled in the program by their employer, but have the option to opt out of participating if they wish to
- Employers must register all eligible employees and automatically deduct a set percentage of their paycheck to be deposited into a Roth IRA or traditional IRA. However, employees will have the option to opt out of participating
- Participation in the program will be mandatory for private sector employers, including nonprofit organizations with five or more employees that do not currently offer a qualified retirement savings program, such as:
| Potential exemptions for employers who offer | |
|
|
|
|
|
|
Are there any upcoming deadlines employers should be mindful of?
For employers learning about how Minnesota’s program works (and wondering if they have missed any deadlines), there are no registration dates available yet. That said, the program is slated to begin no sooner than January 1, 2025. The bill calls for the plan to be rolled out in phases, with the final phase up and running no later than two years after the first one has been implemented. As of August 2024, there have been no registration deadlines established by the board. More specifics should become available later in 2024 as the board continues to establish further guidelines.
That said, if there are businesses that want to get ahead of the game (and are not interested in offering Minnesota’s state-sponsored plan), they have many options when it comes to working with companies that offer 401(k) for small businesses.
Will there be penalties for ignoring mandates?
For those wondering what may happen if requirements are ignored, don’t blame the messenger. It is also expected that penalties will be established for employers that decline to participate if they fall into the mandated group, though the amount has not yet been determined.
Though we touched on some of what workers will want to know about the program, here are some other details that still need to be finalized (but are likely of interest).
How will Minnesota Secure Choice work for participating employees?
Once in effect:
- Employees at least 18 years old are automatically eligible to participate in Secure Choice
- Any employee enrolled will have access to a Roth IRA with a default contribution rate that has yet to be determined. Instead, staffers will have a choice to enroll in a traditional IRA
- Employee contributions to a Roth IRA will be from after-tax funds, while contributions made to a traditional IRA are pre-tax
- If an employee leaves their job, the account can remain active with the state of Minnesota. Or, the employee may choose a lump sum distribution of funds — with additional options to be made available by the board at a later date.
Secure Choice is expected to be available to sole proprietors and self-employed individuals (although this has yet to be confirmed).
Resources employers can use to learn more about Minnesota Secure Choice
While Minnesota Secure Choice Retirement is not yet active, you may want to check out the following resources to find out more about the program, including updates on program implementation.
- Minnesota House Bill
- Bill goes to the Senate
- Legislative Commissions on Pensions and Retirement (LCPR)
- Plan summary from the LCPR
- Minnesota House of Representatives news
Minnesota Secure Choice Retirement is another response to retirement savings concerns
Expected to be implemented in 2025, Minnesota’s Secure Choice Retirement Program is expected to benefit both employers and employees. On one hand, it provides businesses with a no-cost way to offer retirement savings to their employees. And because over 700,000 Minnesota employees are currently without access to a qualified retirement plan, the program can help bridge that gap by providing staffers with a way to save for life after leaving the workforce. In the meantime, if you are looking for guidance on how to set up a plan for your employees, our team can help.
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.