Categories: 401k AuditsTax

Tennessee Retirement Plan Savings Act

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.

Retirement Program Overview

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.

Employer Eligibility

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.

Fund Management

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.

Information Disclosure Policy

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:

  • Authorized by an individual or participant.
  • Required by a court order or subpoena.
  • Required by the Comptroller for purposes of an audit.
  • Needed by the participant’s employer for plan administration purposes.
  • Requested by the Internal Revenue Service.

Contact Us

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.

Erin Carter

Share
Published by
Erin Carter

Recent Posts

BOI Reporting Paused Nationwide

On December 3, 2024, a federal court temporarily blocked enforcement of the Corporate Transparency Act…

1 day ago

Changes to the DOL Overtime Rule

The Department of Labor (DOL) recently appealed a federal ruling that overturned the previously established…

1 week ago

Potential Tax Changes Post 2024 Election

With the election results finalized, business leaders are preparing for potential shifts in tax policy…

2 weeks ago

FinCEN Updates FAQs on BOI Reporting

On October 3, 2024, the Financial Crimes Enforcement Network (FinCEN) released updated Frequently Asked Questions…

4 weeks ago

Year End Tax Planning for Construction Companies

Depending on your location, the end of the year can mean construction season is winding…

1 month ago

2024 Year-End Tax Planning for Individuals

As the end of 2024 approaches, now is the time for individuals to fine-tune their…

1 month ago