SB3278 97TH GENERAL ASSEMBLY

LRB097 19762 JLS 65025 b

97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB3278

Introduced 2/7/2012, by Sen. Iris Y. Martinez

SYNOPSIS AS INTRODUCED:

New Act

Creates the Illinois Automatic IRA Program Act. Provides that the Illinois Automatic IRA Program shall be administered by the State Treasurer and that the Treasurer shall adopt regulations to implement the Program. Allows employees of certain employers that have not offered a qualified retirement plan for 2 years to set aside a percentage of their wages to be deposited into an IRA trust fund administered by the State Treasurer's office. Sets minimum requirements for the operation of the Program. Sets forth duties and authority of the State Treasurer in relation to the Program. Limits State and employer liability. Contains provisions regarding audits and reports. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning employment.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Illinois Automatic IRA Program Act.

Section 5. Definitions. As used in this Act, unless the context requires a different meaning:

"Compensation" means remuneration paid to a participant for services rendered to his or her employer.

"Employee" means any individual who performs or performed any service on behalf of a business operating in the State of Illinois.

"Employer" means any business operating in the State of Illinois for whom an individual performs or performed any service as an employee and that has more than 10 and less than 100 employees and that does not and has not for the previous 2 years offered a qualified retirement plan to its employees.

"Enrollee" means any employee who is enrolled in the Program.

"Fund" means the Illinois Automatic IRA Program Fund.

"IRA" means an individual retirement account under Section 408 of the Internal Revenue Code.

"Participating employer" means any qualified small employer with employees that are enrolled in the Program.

"Program" means the Illinois Automatic IRA Program.

"Qualified small employer" means an employer located in the State of Illinois that (i) employed at least 10 employees during the previous calendar year, (ii) has been in business for a period of at least 2 years after the enactment of this Act, (iii) did not offer a qualified retirement plan, including, but not limited to, a plan qualified under Section 401(a), Section 401(k), Section 403(a), Section 403(b), Section 408(k), Section 408(p), or Section 457(b) of the Internal Revenue Code for the 2 years prior to the effective date of this Act.

Section 10. Establishment of Illinois Automatic IRA Program. There is hereby established a retirement savings program known as the Illinois Automatic IRA Program to be administered by the State Treasurer with the intent of promoting greater retirement savings for private sector employees in a convenient, low-cost, and portable manner.

Section 15. Illinois Automatic IRA Program Fund.

(a) There is established the Illinois Automatic IRA Program Fund to finance the program created by this Act. The assets of the Fund shall be administered by the State Treasurer's office as trust funds and shall be used exclusively for the purposes of administering the Program, including the design and qualification of the Program, supporting the administrative cost of establishing the Program and providing information about the Program.

(b) The Fund shall include the individual accounts of enrollees, which shall be accounted for as individual accounts.

(c) Moneys in the Fund shall consist of moneys received from enrollees and participating employers pursuant to automatic payroll deductions and contributions to savings made under this Act, grants from the United States government and its agencies and instrumentalities, and any other available sources of funds, public or private. Interest and income earned from the investment of such funds shall remain in the Fund and be credited to it.

Section 20. Operation of Program.

(a) The Program shall be administered by the State Treasurer, or his or her designee, and prior to accepting any enrollees or funds the State Treasurer shall design a plan of operation for the Program, which plan of operation shall be approved by the Internal Revenue Service to offer the Program to enrollees on a tax-qualified basis. The Program shall include an option for enrollees to roll pre-tax contributions into an individual retirement account or other eligible retirement plan after ceasing participation in the Program.

(b) In designing the plan of operation for the Program, the State Treasurer shall consult with employers, workers, private sector retirement plan administrators and providers, and any other persons that the State Treasurer determines relevant to the development of an effective and efficient method of operating the Program.

(c) The plan of operation for the Program shall include, at a minimum, the following elements:

(1) a payroll deduction IRA arrangement for employees of qualified small employers wherein a qualified small employer shall deduct a default amount of 2% from an employee's salary, or such other percentage as an employee has elected, and deposit it into the Fund;

(2) the ability for the State Treasurer to enter into an administrative service arrangement that will allow participating employers to achieve economies of scale for pension or retirement savings arrangements relating to accounting, investment, payroll processing employee communication, or investor education;

(3) the ability for each enrolled employee to periodically elect to contribute up to a set percentage of his or her compensation or a dollar amount to the Fund; provided, however, if an election is not made the Program administrator shall select a default contribution option on behalf of the employee;

(4) the ability for each enrolled employee to direct the investment of such enrollee's contribution and be entitled to make investment choices within available categories of investments provided through the Program; provided, however, that if an enrollee does not select an investment option then the Program administrator shall select a default investment option on behalf of the employee;

(5) the ability for the State Treasurer to contract, after an open bid process, with a third-party administrator for the management of the Fund and any other assets of the Program and whose fees shall be reasonable and shall be paid from the Fund and the Program's assets;

(6) a requirement that each retirement plan or account shall pay a proportionate share of the expenses incurred to implement, maintain, and administer the Program; and

(7) a provision that the State Treasurer, his or her designee, any other employees or agents of the Program, or any investment manager shall not have any liability with respect to investment returns under any retirement plan.

Section 25. Duties and authority of State Treasurer. The State Treasurer shall have the authority and responsibility to carry out the following duties:

(1) administer the Fund and the Program, including the authority to invest moneys in the Fund in any instruments, obligations, securities, or property deemed appropriate by the State Treasurer;

(2) apply for, accept, and expend gifts, grants, or other donations from public or private sources to enable it to carry out the objectives of the Program;

(3) enter into contractual agreements, including contracts for legal, actuarial, financial and consulting services;

(4) develop strategies to inform the public of the availability and desirability of the Program, including education about the need to accumulate financial resources for retirement, available options for financing retirement, and basic information about investing strategies; and

(5) engage in such other activities are necessary to implement and administer the Program.

Section 30. Duties of qualified small employers. Qualified small employers shall automatically enroll their employees in the Program and provide payroll deductions for such employees.

Section 35. Regulations. The State Treasurer shall adopt such regulations and procedures as may be necessary to implement the Program. As part of the regulation development process, the State Treasurer shall consult with employers, workers, private sector retirement plan administrators and providers, and any other individuals or entities that it determines relevant to the development of an effective and efficient method for operating the Program. Regulations shall be adopted, including, at a minimum, requirements of enrollment, contribution and investment requirements, as necessary to implement and administer the Program.

Section 40. Liability. Neither the State of Illinois nor any State board, commission, or agency, or any officer, employee, or member of the same shall be liable for any loss or deficiency resulting from investment selected by an enrollee. An employer shall not be liable for any loss or deficiency resulting from making default payroll deductions or default investment decisions on behalf of an employee.

Section 45. Audits and reports. The accounts and records of the State Treasurer showing the receipt and disbursement of funds, from whatever source derived, in connection with the Program be available for audit on as frequent a basis as prescribed by regulations enacted under this Act. The State Treasurer shall issue an annual report on the status of the Program prior to December 1 of each year.

Section 99. Effective date. This Act takes effect upon becoming law.