PRINTER'S NO. 4001
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2396
Session of
2015
INTRODUCED BY HANNA, DRISCOLL, DERMODY, MARKOSEK, FRANKEL,
STURLA, YOUNGBLOOD, GOODMAN, ROZZI, D. MILLER, SCHLOSSBERG,
FLYNN, SCHWEYER, M. DALEY, McNEILL, COHEN AND SAVAGE,
OCTOBER 6, 2016
REFERRED TO COMMITTEE ON FINANCE, OCTOBER 6, 2016
AN ACT
Establishing the Keystone Retirement Savings Program and the
Keystone Retirement Savings Program Fund; providing for
powers and duties of the Treasury Department and the
Department of Revenue; and imposing civil penalties.
TABLE OF CONTENTS
Chapter 1. Preliminary Provisions
Section 101. Short title.
Section 102. Definitions.
Chapter 3. Keystone Retirement Savings Program
Section 301. Establishment of program.
Section 302. Keystone Retirement Savings Program Fund.
Section 303. Program administration.
Section 304. Fiduciary duty.
Section 305. Powers and duties of department.
Section 306. Risk management.
Section 307. Investment managers.
Section 308. Investment options.
Section 309. Benefits.
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Section 310. Program enrollment and participation.
Section 311. Payments.
Section 312. Duty and liability of Commonwealth.
Section 313. Duty and liability of participating employers.
Section 314. Audit and reports.
Chapter 5. Enforcement
Section 501. Civil penalties.
Section 502. Disposition of fines collected.
Chapter 21. Miscellaneous Provisions
Section 2101. Regulations.
Section 2102. Federal considerations.
Section 2103. Notice of program implementation.
Section 2104. Effective date.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
CHAPTER 1
PRELIMINARY PROVISIONS
Section 101. Short title.
This act shall be known and may be cited as the Keystone
Retirement Savings Program Act.
Section 102. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Department." The Treasury Department of the Commonwealth.
"Eligible employee." A person who is 18 years of age or
older and employed by an eligible employer. The term includes an
employee of a small employer that opts to provide payroll
deposit retirement savings arrangements for its employees.
"Eligible employer." An entity engaged in a business,
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industry, profession, trade or other enterprise in this
Commonwealth, whether for profit or not for profit, that
satisfies the following conditions:
(1) Employs at least five employees.
(2) Has been in business at least one full calendar
year.
(3) Has not offered a qualified retirement plan,
including, without limitation, a plan qualified under any of
the following provisions of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. ยง 1 et seq.) in the preceding
calendar year:
(i) Section 401(a) or (k) (26 U.S.C. ยง 401(a) or
(k)).
(ii) Section 403(a) or (b) (26 U.S.C. ยง 403(a) or
(b)).
(iii) Section 408(k) or (p) (26 U.S.C. ยง 408(k) or
(p)).
(iv) Section 457(b) (26 U.S.C. ยง 457(b)).
"Enrollee." An eligible employee who is enrolled in the
program.
"Fund." The Keystone Retirement Savings Program Fund
established in section 302.
"IRA." A Roth individual retirement account under section
408A of the Internal Revenue Code of 1986 (26 U.S.C. ยง 408A).
"Participating employer." An eligible employer or small
employer that provides a payroll deposit retirement savings
arrangement for its employees who are enrollees in the program.
"Payroll deposit retirement savings arrangement." An
arrangement by which a participating employer allows enrollees
to remit payroll deduction contributions to the program.
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"Program." The Keystone Retirement Savings Program
established in section 301.
"Small employer." An entity engaged in a business, industry,
profession, trade or other enterprise in this Commonwealth,
whether for profit or not for profit, that:
(1) employs less than five employees; or
(2) has been in business less than one full calendar
year and notifies the department of the employer's interest
in being a participating employer.
CHAPTER 3
KEYSTONE RETIREMENT SAVINGS PROGRAM
Section 301. Establishment of program.
A retirement savings program in the form of an automatic
enrollment payroll deduction IRA, known as the Keystone
Retirement Savings Program, is hereby established. The program
shall be administered by the department for the purpose of
promoting greater retirement savings for eligible employees in a
convenient, low-cost and portable manner.
Section 302. Keystone Retirement Savings Program Fund.
(a) Establishment.--The Keystone Retirement Savings Program
Fund is hereby established as a special fund in the State
Treasury. The fund is declared to be a spendthrift trust, and
any construction of an enrollee's program account as self-
settled shall not cause the program account to be treated as
other than a spendthrift trust. The fund shall include the
individual retirement accounts of enrollees, which shall be
accounted for as individual accounts. Money in the fund shall
consist of money received from enrollees through participating
employers.
(b) Amounts on deposit.--The amounts deposited in the fund
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shall not constitute property of the Commonwealth, and the fund
shall not be construed to be an agency or instrumentality of the
Commonwealth. Amounts on deposit in the fund shall not be
commingled with Commonwealth funds, and the Commonwealth shall
have no claim to or against, or interest in, such funds.
Section 303. Program administration.
(a) Duty of department.--Subject to the provisions of this
act, the department shall implement and administer the program
in a manner as it determines, provided that the fund is operated
such that the accounts of enrollees meet the requirements for an
IRA under the Internal Revenue Code of 1986 (Public Law 99-514,
26 U.S.C. ยง 1 et seq.).
(b) Operating and administrative costs.--The department
shall, through the Governor, annually submit to the General
Assembly a budget covering the operating and administrative
expenses of the program. Upon approval by the General Assembly
in an appropriation bill, expenses as incurred by the program,
commencing one year after the department begins accepting
enrollees into the program, shall be paid from the fees, charges
and investment earnings of the fund or from any other available
funds.
(c) Repayment of initial appropriation.--The department
shall repay to the General Fund any money appropriated for the
initial planning, organization and administration of the fund.
The repayment shall be made from the fees, charges and
investment earnings of the fund within ten years of the
effective date of this section.
Section 304. Fiduciary duty.
The department, employees of the department and agents of and
investment managers retained by the department shall stand in a
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fiduciary relationship to and shall discharge their duties with
respect to the program solely in the interest of the program's
enrollees and beneficiaries:
(1) for the exclusive purposes of providing benefits to
enrollees and beneficiaries and defraying reasonable expenses
of administering the program; and
(2) by exercising that degree of judgment, skill and
care under the circumstances then prevailing, which persons
of prudence, discretion and intelligence, who are familiar
with such matters, exercise in the management of their own
affairs not in regard to speculation, but in regard to the
permanent disposition of the funds, considering the probable
safety of their capital.
Section 305. Powers and duties of department.
The department shall have the power and duty:
(1) To cause the program to be designed, established and
operated in a manner that:
(i) Complies with all applicable sections of the
Internal Revenue Code of 1986 (Public Law 99-514, 26
U.S.C. ยง 1 et seq.).
(ii) Accords with best practices for retirement
savings vehicles.
(iii) Maximizes participation, savings and sound
investment practices.
(iv) Maximizes ease of administration for
participating employers and enrollees.
(v) Provides an efficient product to enrollees by
pooling investment funds.
(vi) Ensures the portability of benefits.
(vii) Distributes enrollee assets in a manner that
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maximizes financial security in retirement.
(2) To make and enter into contracts necessary for the
administration of the program and fund, including, but not
limited to, retaining and contracting with investment
managers, private financial institutions, other financial and
service providers, consultants, actuaries, counsel, auditors,
third-party administrators and other professionals as
necessary.
(3) To conduct a performance review of each investment
manager no less than once every three years, which shall
include without limitation a review of returns, fees and
customer service. A copy of each performance review shall be
posted on the department's publicly accessible Internet
website.
(4) To design and establish the process for enrollment,
including the process by which an eligible employee can opt
not to participate in the program, select a contribution
level, select an investment option and terminate
participation in the program.
(5) To allocate administrative costs to individual
retirement accounts in the fund on a pro rata basis. Annual
administrative costs of the department shall not exceed 0.1%
of the total fund balance.
(6) To facilitate education and outreach to employers
and employees.
(7) To facilitate compliance by the program with all
applicable requirements for the program under the Internal
Revenue Code of 1986, including tax qualification
requirements or any other applicable law and accounting
requirements.
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(8) To carry out the duties and obligations of the
program in an effective, efficient and low-cost manner.
(9) To exercise any and all other powers reasonably
necessary for the effectuation of the purposes, objectives
and provisions of this act pertaining to the program.
Section 306. Risk management.
The department shall annually prepare and adopt a written
statement of investment policy that includes a risk management
and oversight program. The risk management and oversight program
shall be designed to ensure that an effective risk management
system is in place to monitor the risk levels of the program and
fund portfolio, to ensure that the risks taken are prudent and
properly managed, to provide an integrated process for overall
risk management and to assess investment returns as well as risk
to determine if the risks taken are adequately compensated
compared to applicable performance benchmarks and standards.
Section 307. Investment managers.
(a) Engagement.--The department shall have sole and
exclusive discretion to engage investment managers.
(b) Fees and charges.--An investment manager's fees and
charges shall not exceed 0.5% of fund assets under management.
(c) Duty of compliance.--An investment manager shall comply
with applicable Federal and State laws and regulations, as well
as rules, policies and guidelines promulgated by the department
with respect to the program and the investment of the fund,
including, but not limited to, the investment policy.
(d) Oversight.--An investment manager shall provide reports
to and appear before department personnel as the department
deems necessary or desirable for it to oversee each investment
manager's performance and the performance of the fund.
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Section 308. Investment options.
(a) General rule.--The department shall establish the
following investment options:
(1) A life-cycle fund with a target date based upon the
age of the enrollee.
(2) An equity index fund.
(3) A bond index fund.
(4) Other investment options as the department deems
necessary or desirable.
(b) Default investment option.--The department shall select,
and may change from time to time at the department's discretion,
the default investment option for enrollees who do not elect an
investment option.
Section 309. Benefits.
Interest, investment earnings and investment losses shall be
allocated to individual program accounts for each enrollee as
established by the department. An enrollee's retirement savings
benefit under the program shall be an amount equal to the
balance in the enrollee's program account on the date the
retirement savings benefit becomes payable. The Commonwealth
shall have no liability for the payment of any benefit to any
enrollee or beneficiary in the program.
Section 310. Program enrollment and participation.
Except as otherwise provided in this act, the program shall
be implemented and enrollment of eligible employees shall begin
no later than 24 months after the effective date of this
section. The following apply after the department opens the
program for enrollment:
(1) Each eligible employer shall establish a payroll
deposit retirement savings arrangement to allow each eligible
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employee to participate in the program no later than nine
months after the department opens the program for enrollment.
(2) An eligible employer shall automatically enroll in
the program each eligible employee who has not opted out of
participation in the program and shall provide payroll
deposit retirement savings arrangements for those employees
and deposit, on behalf of those employees, funds into the
program. A small employer may, but is not required to,
provide payroll deposit retirement savings arrangements for
each eligible employee who elects to participate in the
program.
(3) An enrollee has the ability to select or change the
enrollee's contribution level, subject to rules of the
department. If an enrollee fails to select a contribution
level, then the default contribution level shall be 3%, or
such other percentage as the department may determine, of the
employee's wages up to the annual limits permitted by the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. ยง
1 et seq.).
(4) An enrollee may select an investment option from the
investment options selected by the department. An enrollee
may change the investment option at any time, subject to
rules of the department. In the event that an enrollee fails
to select an investment option, the enrollee shall be placed
in the default investment option selected by the department.
(5) Following initial implementation of the program
under this section, at least once every year, participating
employers shall designate an open enrollment period during
which eligible employees who previously opted out of the
program may enroll in the program.
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(6) An eligible employee who opts out of the program who
subsequently wants to participate through the participating
employer's payroll deposit retirement savings arrangement may
only enroll during the participating employer's designated
open enrollment period or, if permitted by the participating
employer, at an earlier time.
(7) An employer shall retain the option at all times to
set up any type of employer-sponsored retirement plan, such
as a defined benefit plan, 401(k) plan, Simplified Employee
Pension (SEP) plan or Savings Incentive Match Plan for
Employees (SIMPLE) plan, or to offer an automatic enrollment
payroll deduction IRA, instead of having a payroll deposit
retirement savings arrangement to allow employee
participation in the program.
(8) An employee may terminate participation in the
program at any time in a manner prescribed by the department.
Section 311. Payments.
Employee contributions deducted by a participating employer
through payroll deduction shall be paid by the participating
employer to the fund using one or more payroll deposit
retirement savings arrangements established by the department,
in cooperation and coordination with the Department of Revenue,
either:
(1) on or before the last day of the month following the
month in which the compensation otherwise would have been
payable to the employee in cash; or
(2) before such later deadline prescribed by the
department for making payments, but not later than the due
date for the deposit of tax required to be deducted and
withheld relating to collection of income tax at source on
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wages or for the deposit of tax required to be paid under the
unemployment insurance system for the payroll period to which
the payments relate.
Section 312. Duty and liability of Commonwealth.
(a) Payments.--The Commonwealth shall have no duty or
liability to any party for the payment of any retirement savings
benefits accrued by any individual under the program. Any
financial liability for the payment of retirement savings
benefits in excess of funds available under the program shall be
borne solely by the entities with whom the department contracts
to provide insurance to protect the value of the program.
(b) Liability.--No Commonwealth board, commission or agency,
or any officer, employee or member thereof, is liable for any
loss or deficiency resulting from particular investments
selected under this act, except for any liability that arises
out of a breach of fiduciary duty under this act.
Section 313. Duty and liability of participating employers.
(a) Liability.--Participating employers shall not have any
liability for an employee's decision to participate in, or opt
out of, the program or for the investment decisions of the
department or of any enrollee.
(b) Fiduciary and other responsibility.--A participating
employer shall not be a fiduciary, or considered to be a
fiduciary, with respect to the program. A participating employer
shall not bear responsibility for the administration, investment
or investment performance of the program. A participating
employer shall not be liable with regard to investment returns,
program design and benefits paid to program participants.
Section 314. Audit and reports.
(a) Reports to Governor and General Assembly.--The
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department shall annually submit the following to the Governor
and the General Assembly:
(1) An audited financial report, prepared by the Auditor
General in accordance with generally accepted accounting
principles, of the program for each calendar year by July 1
of the next following year.
(2) A report prepared by the department, which shall
include, but is not limited to, the following:
(i) A summary of the benefits provided by the
program, including the number of enrollees in the
program.
(ii) The percentage and amounts of investment
options and rates of return, net of fees.
(iii) Any other information that is relevant to make
a full, fair and effective disclosure of the operations
of the program and the fund.
(b) Reports to employers and enrollees.--In addition to any
other statements or reports required by law, the department
shall provide periodic reports at least annually as follows:
(1) To participating employers, a report of the names of
each enrollee employed by the participating employer and the
amounts of contributions made by the participating employer
on behalf of each employee during the reporting period.
(2) To enrollees, a report of contributions and
investment income allocated to, withdrawals from and balances
in their program accounts for the reporting period.
(c) Additional information.--The department may include in a
report under subsection (b) any other information regarding the
program as the department may determine.
CHAPTER 5
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ENFORCEMENT
Section 501. Civil penalties.
(a) Fines.--An eligible employer who fails without
reasonable cause to timely enroll an eligible employee in the
program shall be subject to the following fines:
(1) Seventy-five dollars for each employee for the first
calendar year or portion of the first calendar year during
which the employee neither was enrolled in the program nor
had elected out of participation in the program.
(2) Two hundred dollars for each employee for the second
calendar year or portion of the second calendar year during
which the employee continues to be not enrolled without
electing out of participation in the program.
(3) Three hundred fifty dollars for each employee for
the third calendar year and each calendar year thereafter, or
portion of the third or subsequent calendar year, during
which the employee continues to be not enrolled without
electing out of participation in the program.
(b) Notice and assessment.--
(1) After determining that an employer is subject to
penalty under this section for a calendar year, the
department shall issue a notice of proposed assessment to the
employer. Upon the expiration of 90 days after the date on
which a notice of proposed assessment is issued, the
penalties specified in the notice shall be deemed assessed,
unless the employer files a protest with the department.
(2) If, within 90 days after the date on which it was
issued, a protest of a notice of proposed assessment is filed
under subsection (c), the penalties specified in the notice
shall be deemed assessed upon the date when the decision of
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the department with respect to the protest becomes final.
(c) Protest and hearing.--A written protest against the
proposed assessment shall be filed with the department in the
form prescribed by department, setting forth the grounds on
which the protest is based. If the protest is filed within 90
days after the date the notice of proposed assessment is issued,
the department shall reconsider the proposed assessment and
shall grant the employer a hearing. As soon as practicable after
the reconsideration and hearing, the department shall issue a
notice of decision to the employer, setting forth the
department's findings of fact and the basis of decision, which
decision shall be final.
(d) Notice to demand payment.--As soon as practicable after
the penalties specified in a notice of proposed assessment are
deemed assessed, the department shall give notice to the
employer liable for any unpaid portion of the assessment,
stating the amount due and demanding payment. If an employer
neglects or refuses to pay the entire liability shown on the
notice and demand within 10 days after the notice and demand is
issued, the unpaid amount of the liability shall be a lien in
favor of the Commonwealth upon all property and rights to
property, whether real or personal, belonging to the employer,
and the provisions of the act of April 9, 1929 (P.L.343,
No.176), known as The Fiscal Code, regarding liens, levies and
collection actions with regard to assessed and unpaid
liabilities under that act, including the periods for taking any
action, shall apply.
(e) Mailing of notice.--Whenever notice is required by this
section, it may be given or issued by mailing it by first class
mail addressed to the person concerned at the last known address
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of the person.
(f) Right of inspection.--All books and records and other
papers and documents relevant to the determination of any
penalty due under this section shall, at all times during
business hours of the day, be subject to inspection by the
department or its duly authorized agents and employees.
(g) Tax forms.--The department may require employers to
report information relevant to their compliance with this act on
returns otherwise due from the employers under the act of March
4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, and
failure to provide the requested information on a return shall
cause such return to be deemed not accepted. The Department of
Revenue shall coordinate and cooperate with the department to
revise the form of such returns as necessary.
(h) Tax liability.--For purposes of any provision of law
allowing the department or any other agency of this Commonwealth
to offset an amount owed to a taxpayer against a tax liability
of that taxpayer or allowing the department to offset an
overpayment of tax against any liability owed to the
Commonwealth, a penalty assessed under this section shall be
deemed to be a tax liability of the employer and any refund due
to an employer shall be deemed to be an overpayment of tax of
the employer.
(i) Confidential information.--Except as provided in this
subsection, all information received by the department from
returns filed by an employer or from any investigation conducted
under the provisions of this act shall be confidential, except
for official purposes within the department or pursuant to
official procedures for collection of penalties assessed under
this act. Nothing contained in this subsection shall prevent the
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department from publishing or making available to the public
reasonable statistics concerning the operation of this act
wherein the contents of returns are grouped into aggregates in
such a way that the specific information of any employer shall
not be disclosed. Nothing contained in this subsection shall
prevent the State Treasurer from divulging information to an
authorized representative of the employer or to any person
pursuant to a request or authorization made by the employer or
by an authorized representative of the employer.
Section 502. Disposition of fines collected.
Civil penalties collected under this act shall be used by the
department to cover or defray expenses it incurs in the
performance of its duties under this act.
CHAPTER 21
MISCELLANEOUS PROVISIONS
Section 2101. Regulations.
The department and the Department of Revenue shall promulgate
regulations and adopt any policies or guidelines that may be
necessary or desirable to implement this act. The Department of
Revenue shall coordinate and cooperate with the department as
necessary to implement this act.
Section 2102. Federal considerations.
The department shall request in writing an opinion or ruling
from the appropriate entity with jurisdiction over the Employee
Retirement Income Security Act of 1974 (ERISA) (Public Law 93-
406, 88 Stat. 829) regarding the applicability of ERISA to the
program. The department may not implement the program if the IRA
arrangements offered under the program fail to qualify for the
favorable Federal income tax treatment ordinarily accorded to
IRAs under the Internal Revenue Code of 1986 (Public Law 99-514,
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26 U.S.C. ยง 1 et seq.) or if it is determined that the program
is an employee benefit plan and State or employer liability is
established under ERISA.
Section 2103. Notice of program implementation.
(a) Publication in Pennsylvania Bulletin.--Upon the
implementation of the program in accordance with section 310,
the department shall publish notice in the Pennsylvania Bulletin
advising of the date of implementation of the program.
(b) Internet posting.--The department shall post notice of
the date of implementation of the program on its publicly
accessible Internet website. The notice shall include a
statement that rather than enrolling employees in the program
employers may sponsor an alternative arrangement, including, but
not limited to, a defined benefit plan, 401(k) plan, Simplified
Employee Pension (SEP) plan, Savings Incentive Match Plan for
Employees (SIMPLE) plan or automatic payroll deduction IRA
offered through a private provider.
Section 2104. Effective date.
This act shall take effect as follows:
(1) Section 501 shall take effect nine months after the
department publishes the notice required under section 2103.
(2) The remainder of this act shall take effect
immediately.
20160HB2396PN4001 - 18 -
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