SB1076: Bill Text

Tax credits for retirement plan startup costs and automatic enrollment

The bill creates two income and franchise tax credits that may be claimed by small businesses that have 100 or fewer employees who received at least $5,000 in compensation during the preceding year. Both credits are based on similar federal tax credits. The first credit may be claimed by small businesses for the costs of setting up and administering a retirement plan and educating employees about the plan. The credit is 50 percent of the costs, limited to the greater of $500 or the lesser of $5,000 or $250 multiplied by the number of non-highly compensated employees who are eligible to participate in the plan. The credit may be claimed for three consecutive years and may be not be claimed for any costs that were deducted under federal law. The second credit may be claimed by small businesses that provide for automatic enrollment in their retirement plans. The credit is $500 and may be claimed for three consecutive years, beginning with the year in which the small business first provides for automatic enrollment.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

SB1076,,4 The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB1076,1 Section 1. 14.57 of the statutes is created to read:

SB1076,,6 14.57 Same; attached boards.

SB1076,,7 (1) WisEARNS board. There is created a WisEARNS board that is attached to the state treasurer under s. 15.03. Of the members appointed under pars. (a) to (e), at least one must have experience in the field of investments, at least one must have experience as the owner of a business that employs between 5 and 50 people, and at least one must be an employee who is not eligible for or does not have access to an employer-sponsored retirement plan. The board shall consist of the following members appointed for 4-year terms:

SB1076,,8 (a) The state treasurer or his or her designee.

SB1076,,9 (b) The secretary of financial institutions or his or her designee.

SB1076,,10 (c) One member who has a favorable reputation for skill, knowledge, and experience in the field of retirement saving and investments, appointed by the governor.

SB1076,,11 (d) One member who has a favorable reputation for skill, knowledge, and experience relating to small business, appointed by the governor.

SB1076,,12 (e) One member who is a representative of an association representing employees or who has a favorable reputation for skill, knowledge, and experience in the interests of employees in retirement saving, appointed by the speaker of the assembly.

SB1076,,13 (f) One member who has a favorable reputation for skill, knowledge, and experience in the interests of employers in retirement saving, appointed by the president of the senate.

SB1076,,14 (g) One member who has a favorable reputation for skill, knowledge, and experience in retirement investment products or retirement plan designs, appointed by the state treasurer.

SB1076,,15 (h) One member appointed by the investment board.

SB1076,,16 (i) One member appointed, notwithstanding s. 15.07 (4), by a majority vote of all of the members identified in pars. (a) to (h).

SB1076,,17 (2) Membership prohibited. No individual appointed under sub. (1) (a) to (h) may be a dealer or broker in securities, or be employed by an entity that is primarily a dealer or broker in securities, and any member who accepts such employment shall vacate his or her membership.

SB1076,2 Section 2. 14.69 of the statutes is created to read:

SB1076,,19 14.69 WisEARNS program. (1) Definitions. In this section:

SB1076,,20 (a) “Board” means the WisEARNS board.

SB1076,,21 (b) “Earnings” means all remuneration for employment or services provided to an individual in this state, including salary, fees, bonuses, and including the cash value of all remuneration paid in any medium other than cash.

SB1076,,22 (c) “Eligible employee” means an employee who is 18 years of age or older who works in this state and whose private employer does not offer a retirement savings plan or who is not eligible to participate in a qualified retirement savings plan offered by his or her private employer.

SB1076,,23 (d) “Investment administrator” means the vendor selected under sub. (3) (e).

SB1076,,24 (e) “Plan” means the WisEARNS plan established under sub. (3).

SB1076,,25 (f) “Private employer” means any person engaging in any activity, enterprise or business in this state that has conducted such activity, enterprise, or business in this state for at least 2 years after the effective date of this paragraph .... [LRB inserts date], and did not offer a retirement plan qualified under the Internal Revenue Code during those 2 years.

SB1076,,26 (g) “WisEARNS retirement account” means a retirement savings account established under the plan.

SB1076,,27 (h) “WisEARNS savings account” means a savings account established under the plan that is not a retirement savings account.

SB1076,,28 (2) Duties of treasurer, executive director, and board. (a) The treasurer shall recommend an executive director of the plan to the board, which shall appoint an executive director outside the classified service, to serve at the pleasure of the board. The executive director may not be a member of the board.

SB1076,,29 (b) The executive director appointed under par. (a) shall appoint staff for the plan outside the classified service.

SB1076,,30 (3) Establishment of plan. The board shall establish, implement, and oversee a plan that meets the requirements specified in sub. (8) that shall enroll eligible employees beginning not more than 2 years after the effective date of this subsection .... [LRB inserts date]. Before establishing and implementing the plan, the board shall do all of the following:

SB1076,,31 (a) Conduct a legal analysis regarding the applicability of the federal Employee Retirement Income Security Act of 1974, 29 USC 1001 to 1461, and the Internal Revenue Code to the proposed plan.

SB1076,,32 (b) Enter into interagency agreements with the department of revenue, the department of financial institutions, and the department of workforce development to assist the board in providing outreach services to private employers and employees.

SB1076,,33 (c) Prepare and issue a request for information from prospective vendors of retirement savings accounts described in 26 USC 408 (a), individual retirement annuities described in 26 USC 408 (b), individual retirement bonds, and individual savings accounts to determine the feasibility of the proposed plan and the existence of plans in the private market that meet the requirements set forth in sub. (8).

SB1076,,34 (d) Investigate ways of allowing individuals who are not automatically enrolled in the plan to enroll in the plan and make contributions to retirement savings accounts.

SB1076,,35 (e) Based on the results of the request for information under par. (c), prepare and issue a request for proposals from prospective vendors and select a vendor. The board shall determine the factors to be considered in selecting a vendor for the plan, which shall include the ability of the vendor to meet all of the requirements of the plan set forth in sub. (8) (a) to (z). Sections 16.705 and 16.75 do not apply to a contract entered into under this section. Before awarding a contract under this section, the board shall do all of the following:

SB1076,,36 1. Conduct a cost-benefit analysis to identify and compare the total cost, quality, and technical expertise of the vendors that submitted proposals.

SB1076,,37 2. Review the independence and relationship, if any, of the vendors that submitted proposals to employees of the board and the disclosure of any former employment of the vendor or employees of the vendor with the board, to minimize the likelihood of selection of a vendor that provides or is likely to provide services to industries, client groups, or individuals who are the object of state regulation or the recipients of state funding to a degree that the vendor’s independence would be compromised.

SB1076,,38 3. If the vendor or employees of the vendor have access to federal tax information received directly from the federal internal revenue service or from a source that is authorized by the federal internal revenue service, for the performance of services under the contract under this section, require proof of a background investigation on each individual performing the services. Such a background check shall meet the standards established by the federal internal revenue service under 26 USC 6103 (p) (4) (C).

SB1076,,39 (f) Ensure compliance by the plan with all applicable provisions of the Internal Revenue Code and U.S. department of treasury regulations.

SB1076,,40 (5) Ineligible vendor list. The board shall maintain a list of persons that are or have been a party to a contract under this section that have violated a provision of this section or a contract under this section. The board shall annually forward this list to the department of administration for inclusion in the ineligible vendor list under s. 16.705 (9).

SB1076,,41 (6) Powers of board. The board may do any of the following:

SB1076,,42 (a) Enter into contracts or other arrangements for any of the following services as necessary for implementing and overseeing the plan and otherwise carrying out the purposes of this section:

SB1076,,43 1. The services of financial institutions and depositories and of consultants, accountants, attorneys, investment advisers, investment administrators, 3rd-party administrators, and other professionals.

SB1076,,44 2. The services of other state agencies under interagency agreements under sub. (3) (b).

SB1076,,45 (b) Solicit and accept contributions, gifts, grants, and bequests for the WisEARNS plan administration trust fund or for any other purpose for which a contribution, gift, grant, or bequest is made and received. Moneys received under this paragraph shall be deposited in the WisEARNS plan administration trust fund.

SB1076,,46 (c) Enter into agreements with other governmental entities in this state or outside this state, which maintain retirement savings programs similar to WisEARNS, to collectively invest the assets of the plan to the extent allowed by federal law to benefit retirement savings account holders participating in the plan by achieving efficiencies designed to minimize costs for the plan and retirement savings account holders participating in the plan.

SB1076,,47 (7) Duties of board. The board shall do all of the following:

SB1076,,48 (a) Promulgate rules for the administration of the plan.

SB1076,,49 (b) Collect application, account, or administrative fees to defray the costs of administering the plan at the lowest cost possible. Fees collected under this paragraph shall be deposited in the WisEARNS plan administration trust fund. Fees under this paragraph may not be linked to the value of the trust fund.

SB1076,,50 (c) Establish a policy for the investment of moneys contributed to a retirement savings account, and direct the investment of such moneys in a manner that is consistent with any investment restrictions established by the board. Those investment restrictions shall be consistent with the objectives of the plan and with the standard of responsibility specified in s. 25.15 (2).

SB1076,,51 (d) Evaluate the need for, and procure as needed, insurance to cover any liabilities of the plan and to cover each member of the board for loss or liability resulting from the board member’s act or omission as a member of the board.

SB1076,,52 (e) Determine the eligibility of employers, employees, or individuals to participate in the plan.

SB1076,,53 (f) Establish policies for emergency withdrawals from WisEARNS savings accounts.

SB1076,,54 (g) Annually review the performance of vendors regarding, at a minimum, investment returns, fees, and customer service, and publish results of the review on the plan’s Internet site.

SB1076,,55 (h) Exercise any other powers as may be necessary to oversee the plan and otherwise carry out the purposes of this section.

SB1076,,56 (8) Requirements for plan. The board shall design the plan so that it meets all of the following requirements:

SB1076,,57 (a) The plan allows eligible individuals employed for compensation in this state by a private employer in this state to contribute to WisEARNS accounts through payroll deductions. The plan allows self-employed individuals with earnings in this state to contribute to WisEARNS accounts.

SB1076,,58 (b) The plan requires all private employers in this state to withhold and remit employee contributions to the plan through payroll deductions. If an employer offers a qualified retirement plan under the Internal Revenue Code, including a plan qualified under section 401 (a) or (k), 403 (a) or (b), 408 (k), or 457 (b) of the Internal Revenue Code, the employer does not need to withhold and remit employee contributions for employees who are eligible to participate in the employer-sponsored plan.

SB1076,,59 (c) Except as provided in par. (d), the plan provides that the default individual retirement account is a Roth IRA account.

SB1076,,60 (d) If the plan offers options for account types other than a Roth IRA, the plan allows an enrolled eligible employee to select any of these other account types for investing contributions under the plan.

SB1076,,61 (e) The plan provides an eligible employee who is enrolled in the plan with multiple investment options within each account type, which may include any of the following investment options:

SB1076,,62 1. A stable value or capital preservation fund.

SB1076,,63 2. A target date index fund or age-based fund that automatically rebalances asset allocations based on the eligible employee’s age.

SB1076,,64 3. A low-cost fund focused on income generation.

SB1076,,65 4. A low-cost fund focused on asset growth.

SB1076,,66 5. A low-cost fund focused on balancing risk and return.

SB1076,,67 (f) The investment policy for the plan includes all of the following concepts:

SB1076,,68 1. Best practices in the industry for retirement savings vehicles.

SB1076,,69 2. The promotion of portability of retirement savings accounts.

SB1076,,70 3. The minimization of fees and expenses.

SB1076,,71 4. The maximization of possible income replacement, balanced with appropriate levels of risk.

SB1076,,72 (g) The plan requires the investment administrator to offer to each enrolled eligible employee, before the employee makes his or her investment selections, a tool allowing the employee to identify the employee’s risk tolerance and projected retirement date as an aid to the employee in selecting suitable investments under the plan.

SB1076,,73 (h) The plan requires that the first $400 of an enrolled eligible employee’s contributions be deposited in a WisEARNS savings account and thereafter, unless the employee selects a different investment option, the employee’s contributions be to a WisEARNS retirement account and deposited in a fund described in par. (e) 2. The plan shall allow an employee to select a different investment option before the first $400 is deposited in a WisEARNS retirement account. An employee shall be allowed to withdraw the first $400 for emergency use from the employee’s WisEARNS savings account, and contributions subsequent to the withdrawal shall be deposited in the WisEARNS savings account until the amount in the employee’s WisEARNS savings account is restored to $400.

SB1076,,74 (i) Except as provided in par. (k), during an eligible employee’s first year of enrollment in the plan, the participating employer’s payroll deduction each pay period shall be at a rate of 5 percent of the employee’s gross wages, and this deducted amount shall be remitted to the investment administrator as the employee’s account contribution.

SB1076,,75 (j) Except as provided in par. (k), a participating employer shall increase the payroll deduction rate under par. (i) by 1 percent per year until the payroll deduction rate is the maximum allowed under the Internal Revenue Code.

SB1076,,76 (k) An enrolled eligible employee may elect a different payroll deduction rate than that provided for in pars. (i) and (j), except that the rate may not be less than 1 percent or more than the maximum allowed under the Internal Revenue Code.

SB1076,,77 (L) The plan sets forth a process for enrollment of eligible employees in the plan, which shall include all of the following processes:

SB1076,,78 1. Automatic enrollment of eligible employees in the plan.

SB1076,,79 2. Opting out of enrollment in the plan before any payroll deduction is made.

SB1076,,80 3. Opting out of enrollment in the plan at any time after a payroll deduction is made.

SB1076,,81 4. Changing the payroll deduction rate from that provided for in pars. (i) and (j)

SB1076,,82 (m) The plan provides a process for all of the following:

SB1076,,83 1. Employer withholding from employees’ wages contributions to WisEARNS accounts and remittance of those contributions to the investment administrator of the plan.

SB1076,,84 2. Eligible employees’ and self-employed individuals’ nonpayroll contributions to their WisEARNS retirement accounts.

SB1076,,85 3. Emergency withdrawals from WisEARNS savings accounts in accordance with procedures established by the board under sub. (7) (f).

SB1076,,86 (n) The plan requires contributions to WisEARNS accounts to be deposited directly with the investment administrator of the plan.

SB1076,,87 (o) The plan, to the greatest extent possible, uses existing employer and public infrastructure to facilitate contributions to WisEARNS accounts and outreach to employees and private employers.

SB1076,,88 (p) The plan prohibits employer contribution to an employee WisEARNS account.