February 24, 2023
While retirement has long been considered a time for rest, relaxation, and rejuvenation, the unfortunate reality is this may be out of reach for many. Although there are many contributing factors exacerbating the situation, it appears that lack of workplace retirement plan coverage is the main cause. Without employer-matching contributions, it is difficult for most workers to accumulate retirement savings. Given this, it is no surprise that 22% of Americans have less than $5,000 saved and 15% have nothing saved at all. This alarming trend has prompted Congress to act by making additional retirement plan reforms. Despite this, it may be several years before the full benefits of the SECURE Act 2.0 are realized.
Concurrently, many state legislatures have also been looking for ways to address this issue. Several including Illinois and Colorado have launched state-facilitated retirement programs. In Illinois, a business can enroll and offer a plan option, or individual workers can also elect to participate. These programs have been effective at expanding plan access. For this reason, the Tennessee legislature is currently reviewing similar legislation. The Tennessee Retirement Savings Plan Act, calls for the creation of a state-facilitated retirement savings program. Although it is still under consideration, it is quite likely that it will be passed soon. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
The proposed plan will allow any employee earning income in the state to participate by making regular payroll deductions. Automatic enrollment is required for eligible employees at a default contribution rate of 5%, but opt-outs are permitted. There will also be an automatic escalation feature that can be adjusted within the IRS pre-approved limits. These accounts will be portable so if an employee changes jobs the retirement savings will not be impacted. It is important to note that the plan will also permit a participant to roll over funds into other retirement accounts.
Although the program is expected to become effective on January 1, 2026, this does not mean that all employers will be immediately eligible to participate. Eligibility depends on the total number of workers employed by the business. Starting in 2026, those working in the state for business with more than 100 employees are immediately eligible. In 2027, individuals working at businesses with between 25 and 100 employees can participate. Finally, in 2028, workers at companies with between 5 and 24 employees are eligible. It is important to note, prior to offering the plan a business must register with the state to determine whether participation is required.
The legislation calls for the creation of a Tennessee Retirement Savings Plan Board to direct investments and set investment policies. It is also responsible for establishing various processes including those governing automatic enrollment, employee opt-out, minimum and maximum contribution levels, and the frequency of participant communication.
There are also very specific rules about the disclosure of personally identifiable information (PII). This includes Social Security, bank, transit, routing, credit card, debit card, and telephone numbers. Addresses, the amount contributed, and earnings on amounts contributed are also included. Only in certain circumstances can these details be shared, including when:
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While the legislation is still under consideration it does provide important insights into the state’s plans. More importantly, it serves as a reminder to businesses about the importance of a workplace retirement plan. If you have questions about the information outlined above or need assistance with a plan set up, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.