Bill would automatically enroll uncovered Wisconsin workers in retirement savings

The WisEARNS Board would oversee a retirement savings plan with automatic enrollment and payroll deductions. Workers would have to be at least 18 and work in Wisconsin without access to their employer’s retirement plan. Covered employers would have operated in Wisconsin for at least two years after the employer definition takes effect without offering a federally qualified retirement plan during those years. Workers could opt out before any money is deducted, and employers could not contribute to their accounts. Before starting the plan, the board would review federal retirement and tax law and seek information from account providers. Employee enrollment would begin no later than two years after the plan-establishment provision takes effect.

Employers would deduct a default share of wages, and WisEARNS would direct that money into workers’ accounts. These defaults would apply to workers enrolled in WisEARNS. The default retirement account would be a Roth IRA, a type of individual retirement account. Workers could choose a different deduction rate or opt out of participation. Workers could skip the separate savings account before the first $400 is deposited. Later contributions would go into a fund based on age or expected retirement date unless the worker chose another investment. Workers could move retirement savings to another federally qualified retirement account. The default deduction would rise by one percentage point each year after the first enrollment year, up to the maximum allowed under federal tax law.

Eligible small businesses could claim state tax credits for retirement plan costs and automatic enrollment. The credits would cover businesses with 100 or fewer employees who received at least $5,000 each in compensation during the preceding year. Eligible costs would include setting up and running a retirement plan and teaching employees about it. The plan-cost credit would cover 50% of eligible costs. Its cap would be the greater of $500 or the smaller of $5,000 and $250 times the number of eligible employees who are not highly paid. Businesses could not claim that credit for costs deducted under federal law. The automatic-enrollment credit would start in the year the business first offered automatic enrollment.

The WisEARNS Board would use separate rules to hire account providers. WisEARNS contracts would be exempt from two specified sections of the state’s usual contracting rules. Before awarding a contract, the board would compare providers’ costs, quality, and expertise and review relationships that could compromise their independence. Providers would need proof of federally required background checks for people whose work gives them access to federal tax information. Each year, the board would send the Department of Administration a list of providers that broke program or contract rules for inclusion on the state’s list of providers barred from contracts.