Law provides automatic retirement savings for eligible new state workers

The law provides automatic enrollment in the state’s 457(b) plan, a retirement savings account funded through paycheck deductions. Enrollment covers eligible people who enter state employment on or after the law’s effective date, including returning workers and returning retirees. Workers covered by a union contract are excluded unless their contract expressly allows automatic enrollment. Workers can opt out before deductions begin. The law takes effect 10 days after the Treasurer publishes notice that the Office of Management and Budget has certified completion of necessary payroll upgrades. Deductions normally start within 90 days of employment.

The plan’s Board sets the starting deduction rate and may raise default rates based on years of participation. Default rates apply to covered workers who do not choose a different rate. The starting default rate must be at least 3% of pay, and the maximum default rate cannot exceed 15%. Automatic increases may be one or two percentage points, no more often than annually. Workers can choose another contribution amount or stop participating under Board rules. Dollar limits set by law also apply.

The Board selects a default retirement fund and must explain enrollment, contribution choices, investment choices, and refund rules to covered workers. These rules cover automatically enrolled workers. Those who opt out can later choose to join. The default investment is an age-appropriate target date fund, which is designed around an expected retirement year. Workers can change investments for future contributions, existing savings, or both under Board rules. To recover automatically contributed savings, workers must opt out and request their account balance by the Board’s deadline. The Board decides whether default contributions are made before or after taxes. The Board must give advance enrollment notice as soon as practicable after employment starts. Its refund request deadline may be earlier than, but cannot exceed, 120 days from employment.