LRB-5775/1
MIM & ARG:klm
2021 - 2022 LEGISLATURE
February 9, 2022 - Introduced by Senators Ringhand, Agard,
Johnson, Larson,
Pfaff and Roys, cosponsored by Representatives Macco,
Goyke, Andraca,
Armstrong, Cabral-Guevara, Considine, Drake, Haywood, Hebl, Hintz,
Horlacher, Kitchens, McGuire, Moore Omokunde, Ohnstad, Pope, Sinicki,
Snodgrass, Spreitzer, Steffen, Stubbs, Thiesfeldt, Vruwink and
Shankland. Referred to Committee on Financial Institutions and Revenue.
SB947,1,6
1An Act to amend 20.515 (1) (a), chapter 40 (title), 40.08 (8) (a) (intro.), 48.94 (1),
269.14 (1) (a) and 175.46 (5) (a); and
to create 16.705 (1b) (e), 16.71 (5t), 20.515
3(2), 25.14 (1) (a) 20., 25.17 (1) (zk), 25.17 (2) (h), 25.90, subchapter X of chapter
440 [precedes 40.96], 40.96 and 73.03 (77) of the statutes;
relating to: creating
5a 401Kids savings program and the 401Kids savings program trust fund;
6granting rule-making authority; and making an appropriation.
Analysis by the Legislative Reference Bureau
401Kids savings program
This bill creates the 401Kids Savings Program and requires the Department of
Employee Trust Funds (ETF) to establish and administer the program or to select
a vendor to administer the program.
The bill provides several ways of establishing a 401Kids savings account. First,
the bill requires the state registrar to submit to ETF a copy of the record of birth for
each child born in Wisconsin on or after the effective date of the bill and requires ETF
to establish a 401Kids savings account for the child, with the child designated as the
account beneficiary and each parent identified in the record of birth designated as
an account owner. Second, the bill requires each court order granting an adoption
of a minor in Wisconsin on or after the effective date of the bill to be submitted to ETF
and requires ETF to establish a 401Kids savings account for the child, with the child
designated as the account beneficiary and each parent identified in the court order
designated as an account owner. Third, any other person may establish a 401Kids
savings account by making application for the account, designating an individual
who is a minor as the account beneficiary, and making an initial contribution to the
account. If ETF establishes a 401Kids savings account based on the receipt of a birth
record or adoption order for the account beneficiary, ETF must deposit $25 into the
account. When an account beneficiary reaches 18 years of age, the account
beneficiary becomes the only account owner.
Under the bill, after ETF establishes the account, the account beneficiary,
account owner, or any person authorized by the account beneficiary or account owner
may contribute to the account. Distributions from an account may be used only to
pay for a “qualified expense,” which is defined as any of the following: 1) any cost
incurred by an account beneficiary in connection with the account beneficiary
attending an institution of higher education or receiving any postsecondary training;
2) any cost incurred by an account beneficiary in connection with the account
beneficiary purchasing the account beneficiary's first home; 3) a medical emergency
of the account beneficiary; or 4) any cost incurred by an account beneficiary during
the account beneficiary's retirement relating to housing, food, clothing, health care,
transportation, or other household needs. The department may terminate an
account under certain circumstances, including if the account balance is $0, the
account beneficiary dies, or there has been no activity on the account for a period of
10 years. If the department terminates an account, the department must distribute
the account balance to the account owner or the account owner's estate. If the
department contributed to an account, the account owner must repay the full amount
of all state contributions if the account beneficiary is not a resident of this state at
the time of any distribution from the account.
The bill imposes certain duties on ETF, including establishing investment
guidelines for 401Kids savings accounts. The bill also requires the department to
conduct public outreach and fundraising to generate donations for the 401Kids
savings program. The department must develop a plan that allows the department,
after the program is fully operational, to devote revenues generated under the
program to fund the establishment of future accounts. The bill also authorizes the
department to enter into contracts for professional services to assist in administering
and evaluating the program. The department may promulgate rules to implement
and administer the program. Also under the bill, the department may charge
reasonable fees to account owners to repay the general fund for costs related to
establishing the program.
The bill allows ETF to select a vendor to administer the program using a
competitive proposal process. If ETF elects to contract with a vendor, the contract
between ETF and the vendor must require the vendor to reimburse the state for the
state's administrative costs for the program; select an accounting firm to annually
audit the program; and provide a quarterly account statement to each account owner.
The bill also creates a segregated fund designated the 401Kids savings program
trust fund, which consists of revenue from account enrollment fees and account
contributions, revenue from distributions and fees paid by the vendor, account owner
repayments of board contributions, and fees for repayment to the general fund for
initial costs to establish the program. This trust fund is managed by the State of
Wisconsin Investment Board but is subject to guidelines established by the board.
However, SWIB's investment management duty excludes any funds under the
management and control of a vendor selected by ETF.
The bill directs the Department of Revenue to establish a program under which
taxpayers may direct that a portion of their tax refund be contributed to a 401Kids
savings account.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB947,1
1Section 1
. 16.705 (1b) (e) of the statutes is created to read:
SB947,3,22
16.705
(1b) (e) The department of employee trust funds under s. 40.96 (7).
SB947,2
3Section 2
. 16.71 (5t) of the statutes is created to read:
SB947,3,54
16.71
(5t) The department shall delegate authority to the department of
5employee trust funds to enter into vendor contracts under s. 40.96 (8).
SB947,4
8Section 4
. 20.515 (1) (a) of the statutes is amended to read:
SB947,4,5
120.515
(1) (a)
Annuity supplements and payments. A sum sufficient to pay the
2benefits authorized under ss. 40.02 (17) (d) 2. and 40.27 (1), (1m) and (3) in excess
3of the amounts payable under other provisions of ch. 40
, except subch. X, and to
4reimburse any amounts expended under par. (w) for the costs of administering the
5benefits provided under ss. 40.02 (17) (d) 2. and 40.27 (1), (1m) and (3).
SB947,5
6Section 5
. 20.515 (2) of the statutes is created to read:
SB947,4,11
720.515 (2) 401Kids savings program. (a)
Administrative expenses; initial
8expenses. Biennially, the amounts in the schedule for the administrative expenses
9of the 401Kids savings program established under s. 40.96, including for the initial
10establishment of the 401Kids savings program and the expenses of promoting the
11program and establishing accounts.
SB947,4,1312
(j)
Gifts, grants, and donations. All moneys received from gifts, grants, and
13donations to carry out the purposes for which made.
SB947,4,1614
(q)
Payment of distributions. From the 401Kids savings program trust fund,
15a sum sufficient for the payment of distributions under s. 40.96, including
16distributions upon account termination.
SB947,4,2117
(r)
Administrative expenses; 401Kids savings program trust fund. Biennially,
18from the 401Kids savings program trust fund, the amounts in the schedule for the
19administrative expenses of the 401Kids savings program established under s. 40.96,
20including the expense of promoting the program, and all moneys transferred to the
21fund under s. 40.96 (11) for repayment of the amounts appropriated under par. (a).
SB947,5,222
(t)
Vendor fees. From the 401Kids savings program trust fund, all moneys
23received as repayments under s. 40.96 (6) (c) or (d), and all moneys received as fees
24from the vendor under s. 40.96 (8) (c) 1. that are designated for funding 401Kids
1savings accounts, for the purpose of funding 401Kids savings accounts under s. 40.96
2(4) (d) 2.
SB947,6
3Section 6
. 25.14 (1) (a) 20. of the statutes is created to read:
SB947,5,44
25.14
(1) (a) 20. The 401Kids savings program trust fund.
SB947,7
5Section 7
. 25.17 (1) (zk) of the statutes is created to read:
SB947,5,76
25.17
(1) (zk) 401Kids savings program trust fund (s. 25.90), but subject to sub.
7(2) (h);
SB947,8
8Section 8
. 25.17 (2) (h) of the statutes is created to read:
SB947,5,129
25.17
(2) (h) Invest the moneys belonging to the 401Kids savings program trust
10fund in a manner consistent with the guidelines established under s. 40.96 (2) (b),
11unless the moneys are under the management and control of a vendor selected under
12s. 40.96 (8).
SB947,9
13Section 9
. 25.90 of the statutes is created to read:
SB947,5,19
1425.90 401Kids savings program trust fund. There is established a separate
15nonlapsible trust fund designated as the 401Kids savings program trust fund,
16consisting of all revenue from enrollment fees for and contributions to 401Kids
17savings accounts established under s. 40.96, from distributions and fees paid by the
18vendor under s. 40.96 (8), fees paid by account owners under s. 40.96 (11), and from
19repayments under s. 40.96 (6) (c) and (d).
SB947,10
20Section
10. Chapter 40 (title) of the statutes is amended to read:
SB947,5,2221
CHAPTER 40
22
PUBLIC EMPLOYEE TRUST FUND
SB947,5,23
23and 401Kids savings program
SB947,11
24Section
11. 40.08 (8) (a) (intro.) of the statutes is amended to read:
SB947,6,2
140.08
(8) (a) (intro.)
Benefits Except as provided in s. 40.96, benefits provided
2under this chapter shall be considered abandoned as follows:
SB947,12
3Section 12
. Subchapter X of chapter 40 [precedes 40.96] of the statutes is
4created to read:
SB947,6,77
401Kids Savings program
SB947,13
8Section 13
. 40.96 of the statutes is created to read:
SB947,6,9
940.96 401Kids savings program. (1)
Definitions. In this section:
SB947,6,1110
(a) “Account beneficiary” means an individual for whom the department
11establishes a 401Kids savings account under sub. (4) (a), (b), or (c).
SB947,6,1212
(b) “Account owner” means the following:
SB947,6,1513
1. If the account beneficiary is less than 18 years of age, any individual
14designated by the department as an account owner in establishing a 401Kids savings
15account under sub. (4) (a), (b), or (c).
SB947,6,1616
2. If the account beneficiary is at least 18 years of age, the account beneficiary.
SB947,6,1817
(c) “Dependent” means a dependent as defined under section
152 of the Internal
18Revenue Code.
SB947,6,1919
(d) “Qualified expense” means any of the following:
SB947,6,2320
1. Any cost incurred by an account beneficiary in connection with the account
21beneficiary attending an institution of higher education or receiving any
22postsecondary training, including expenses for tuition, fees, books, supplies,
23equipment, food, or housing.
SB947,7,3
12. Any cost incurred by an account beneficiary in connection with the account
2beneficiary purchasing the account beneficiary's first home, including mortgage
3payments, a down payment, or closing costs.
SB947,7,54
3. Any cost incurred by an account beneficiary related to a medical emergency
5of the account beneficiary.
SB947,7,86
4. Any cost incurred by an account beneficiary during the account beneficiary's
7retirement relating to housing, food, clothing, health care, transportation, or other
8household needs.
SB947,7,9
9(2) Duties of the department. The department shall do all of the following:
SB947,7,1110
(a) Except as provided under sub. (8), establish and administer a 401Kids
11savings program as described in this section.
SB947,7,1312
(b) Establish investment guidelines for contributions to and the earnings on
13401Kids savings accounts established under this section.
