Alaska, Wisconsin Next Up for State-Run Plans?

Add private-sector employees in Alaska and Wisconsin to those covered by state-run plans if their employers do not offer a retirement plan. Maybe. 

That is, if the governments of both states enact bills that would create state-run retirement savings plans for private-sector employees who do not have access to them in their workplaces. 

Nathan Glassey, Director of Federal and State Legislative Affairs of the American Retirement Association, hailed these bills as a means to close the retirement plan coverage gap and remarked that “we support legislators in this effort.” 

Alaska 

SB 135 would establish the Alaska Work and Save Program, an auto-IRA program. 

The bill also would create the Alaska Retirement Savings Board, which would administer the program. The board would have the discretion to partner with other states.

Under the program, an employer that does not offer a qualified retirement plan would be required to facilitate participation of its employees in the program.

Participants. Eligible employees would be automatically enrolled in the program and make payroll deductions to an individual retirement savings account. The scope of the program would be broader than that, however: Any person who earns compensation in Alaska would be eligible to voluntarily enroll in it.

A participating employee could:

• opt out of the program;
• make contributions at a rate different than the default rate; and
• increase contributions at a rate different than the default rate established by the board.

Participants also could direct that money from their accounts be contributed to the crime victim compensation fund, the peace officer and firefighter survivors' fund, or one or more of the educational organizations, community foundations, or charitable organizations that appear on the contribution list contained in the application. 

Contributions. Employee contributions would be made at the default contribution rate established by the board, and the contribution rate would increase at the default rate the board established. 

Status. Sen. Bill Wielechowski (D-Anchorage) introduced the bill in 2023, and it is still alive. The Labor and Commerce Committee is reviewing the legislation, and the Department of Revenue has analyzed it at the committee’s request. The committee is set to hold a hearing on the measure on April 5. 

Wisconsin

Legislation is before both chambers of the Wisconsin legislature that would create WisEARNS, a defined contribution retirement savings plan for employees of private employers in Wisconsin that do not offer an employer-sponsored retirement plan or that do not offer such a plan to all employees. 

Contributions. Participants would contribute to a Roth IRA through payroll deductions. In an employee’s first year of enrollment, those deduction would be made at 5% of gross wages, with automatic escalation at 1% per year until reaching the maximum allowed under the federal Internal Revenue Code. 

Investments. Under the plan, eligible employees must have certain investment options within each account type, including a stable value or capital preservation fund and a target date index fund or age-based fund. Employees would have the ability to choose investment options and change them. 

WisEARNS Board. The legislation also would create the WisEARNS Board which would administer the program. The board would operate under the Office of the State Treasurer. It would have nine members: 

• the state treasurer or his or her designee; 
• the secretary of financial institutions or his or her designee; 
• two members appointed by the governor; 
• two members appointed by the speaker of the assembly and the president of the senate; 
• one member appointed by the state treasurer; 
• one member appointed by the State of Wisconsin Investment Board; and 
• one member appointed by the other members. 

Tax credits. The legislation also would create tax credits for startup costs of employers that choose to establish a retirement plan, as well as the costs of automatic enrollment. It would create two income and franchise tax credits that may be claimed by small businesses that have 100 or fewer employees who received at least $5,000 in compensation during the preceding year. Both credits are based on similar federal tax credits. 

The first credit could be claimed by small businesses for the costs of setting up and administering a retirement plan and educating employees about the plan. The credit would be 50% of the costs, limited to the greater of $500 or the lesser of $5,000 or $250 multiplied by the number of non-highly compensated employees who are eligible to participate in the plan. The credit could be claimed for three consecutive years and could be not be claimed for any costs that were deducted under federal law. 

The second credit could be claimed by small businesses that provide for automatic enrollment in their retirement plans. The credit would be $500 and could be claimed for three consecutive years, beginning with the year in which the small business first provides for automatic enrollment.

Status. Senate Minority Leader Dianne Hesselbein (D-Middleton) introduced SB 1076 on Feb. 26; it was referred to the Senate Committee on Universities and Revenue. Rep. Mike Bare (D-Verona) introduced AB 1170 on March 22; it was referred to the Committee on State Affairs.