Pensions and Retirement Benefits

SENATE BILL 2397
By Yarbro

HOUSE BILL 1447
By Baum
HB1447
008932
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AN ACT to amend Tennessee Code Annotated, Title 4;
Title 8; Title 9 and Title 50, relative to retirement.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 8, Chapter 5, is amended by adding the
following as a new part:
8-5-301. This part is known and may be cited as the "Tennessee Retirement
Savings Plan Act."
8-5-302.
(a) There is created a Tennessee retirement savings board consisting of
seven (7) members as follows:
(1) The state treasurer or the treasurer's designee;
(2) The following members, appointed by the governor:
(A) A representative of employers;
(B) A representative with experience in the field of
investments;
(C) A representative of an association representing
employees; and
(D) A member of the public who is retired;
(3) A member of the senate, appointed by the speaker of the
senate to be a nonvoting advisory member of the board; and
(4) A member of the house of representatives, appointed by the
speaker of the house of representatives to be a nonvoting advisory
member of the board.

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(b)
(1) The governor and the speakers of the senate and the house
of representatives shall first make appointments to the Tennessee
retirement savings board for terms of office beginning on January 1,
2027.
(2) Notwithstanding the term of office specified by subsection (c),
of the members first appointed to the Tennessee retirement savings
board by the governor:
(A) The representative of employers shall serve for a term
ending December 31, 2028;
(B) The representative of an association representing
employees shall serve for a term ending December 31, 2029; and
(C) The two (2) other members shall serve for a term
ending December 31, 2030.
(c) The term of office of each member of the board appointed by the
governor is four (4) years, but a member serves at the pleasure of the governor.
A member is eligible for reappointment. If there is a vacancy for any cause, then
the governor shall make an appointment to become immediately effective for the
unexpired term.
(d) Each legislative member serves at the pleasure of the appointing
authority and may serve as long as the member remains in the chamber of the
general assembly from which the member was appointed.
(e) The state treasurer or the treasurer's designee appointed to the board
under subdivision (a)(1) shall serve as chair of the board.

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(f) A majority of the voting members of the board constitutes a quorum
for the transaction of business.
(g)
(1) The members of the board who are not governmental
employees or public officials must be paid a per diem of seventy-five
dollars ($75.00) for attending board meetings.
(2) Each member is entitled to reimbursement for travel and other
necessary expenses incurred in the performance of official duties in
accordance with the state comprehensive travel regulations as
promulgated by the commissioner of finance and administration and
approved by the attorney general and reporter.
(h) The board is administratively attached to the department of treasury,
and department staff shall provide administrative support to the board.
8-5-303.
(a) The Tennessee retirement savings board shall develop a defined
contribution retirement plan for residents of this state who are employed for
compensation in this state. The board shall conduct a market and legal analysis
of the plan.
(b) The board has the following powers:
(1) To establish, implement, and maintain the plan developed
under this section;
(2) To promulgate rules as are necessary to carry out the purpose
and intent of this part, and to ensure that the plan complies with
applicable federal and state laws, rules, regulations, notices, and

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interpretations. All rules must be promulgated in accordance with the
Uniform Administrative Procedures Act, compiled in title 4, chapter 5;
(3) To direct the investment of the funds contributed to accounts
in the plan consistent with the investment restrictions established by the
board. The investment restrictions must be consistent with the objectives
of the plan, and the board shall exercise the judgment and care then
prevailing that persons of prudence, discretion, and intelligence exercise
in the management of their own affairs with due regard to the probable
income and level of risk from certain types of investments of money, in
accordance with the policies established by the board;
(4) To collect application, account, or administrative fees to defray
the costs of administering the plan;
(5)
(A) To make or enter into contracts or agreements with:
(i) Financial institutions, depositories, consultants,
actuaries, auditors, investment advisers, investment
managers, third-party administrators, or other consultants
and professionals as necessary to carry out the duties and
responsibilities under this part and the plan established by
the board;
(ii) Individuals or entities providing research,
technical assistance, or technology; and
(iii) State agencies to assist the board in the
fulfilment of its duties;

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(B) All expenses and fees incidental to the services
described in subdivision (b)(5)(A) must be charged to and paid
from participant accounts;
(6) To evaluate the need for, and procure as needed, pooled
private insurance of the plan;
(7) To develop and implement an outreach plan to gain input and
disseminate information regarding the plan and retirement savings in
general; and
(8) To delegate to the state treasurer the day-to-day
administration, operations, and responsibilities of the plan, including, but
not limited to:
(A) Exercising the duties and responsibilities contained in
this part to implement the purpose of this part;
(B) Assigning duties and responsibilities to the state
treasurer's staff, private vendors, or contractors, as the state
treasurer deems necessary and proper;
(C) Consulting with professionals as necessary about the
administration of the plan; and
(D) Establishing policies, guidelines, and operating
procedures in accordance with this part.
8-5-304.
(a) The plan developed and established by the Tennessee retirement
savings board under § 8-5-303 must:

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(1) Allow eligible individuals employed for compensation in this
state to contribute to an account established under the plan through
payroll deduction;
(2) Require an employer with more than five (5) employees to
offer its employees the opportunity to contribute to the plan through
payroll deductions unless the employer offers a qualified retirement plan,
including, but not limited to, a plan qualified under Section 401(a), 401(k),
403(a), 403(b), 408(k), 408(p), or 457(b) of the Internal Revenue Code
(U.S.C. title 26);
(3) Provide for automatic enrollment of employees and allow
employees to opt out of the plan;
(4) Have a default contribution rate of five percent (5%) of wages
or salary;
(5) Offer default escalation of contribution levels that can be
increased or decreased within the limits allowed by the Internal Revenue
Code (U.S.C. title 26);
(6) Provide for contributions to the plan to be deposited directly
with the investment administrator for the plan;
(7) Whenever possible, use existing employer and public
infrastructure to facilitate contributions to the plan, recordkeeping, and
outreach;
(8) Require no employer contributions to employee accounts;
(9) Require the maintenance of separate records and accounting
for each plan account;

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(10) Provide for reports on the status of plan accounts to be
provided to plan participants at least annually;
(11) Allow for account owners to maintain an account regardless
of place of employment and to roll over funds into other retirement
accounts;
(12) Pool accounts established under the plan for investment;
(13) Be professionally managed;
(14) Provide that the state of Tennessee and employers that
participate in the plan have no proprietary interest in the contributions to
or earnings on amounts contributed to accounts established under the
plan;
(15) Provide that the investment administrator for the plan is the
trustee of all contributions and earnings on amounts contributed to
accounts established under the plan;
(16) Not impose any duties under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. § 1001 et seq.) on employers;
(17) Keep administration fees in the plan low;
(18) Allow the use of private sector partnerships to administer and
invest the contributions to the plan under the supervision and guidance of
the board; and
(19) Allow employers to establish an alternative retirement plan
for some or all employees.
(b) The plan, the board, each board member, and the state of Tennessee
shall not guarantee any rate of return or any interest rate on any contribution.

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The plan, the board, each board member, and the state of Tennessee are not
liable for any loss incurred by any person as a result of participating in the plan.
8-5-305. The Tennessee retirement savings board shall adopt rules that:
(1) Establish the process for voluntary enrollment in the plan developed
under § 8-5-303, including procedures for automatic enrollment of employees
and for employees to opt out of the plan;
(2) Establish the process for participants to make the default
contributions to plan accounts and to adjust the contribution levels;
(3) Establish the process for employers to withhold employee
contributions to plan accounts from employees' wages and send the contributions
to the investment administrator for the plan;
(4) Establish the process for allowing employees to opt out of enrollment
in the plan;
(5) Set minimum, maximum, and default contribution levels in
accordance with limits established by the Internal Revenue Code (U.S.C. title
26);
(6) Establish the process for withdrawals from plan accounts;
(7) Establish the process and requirements for an employer to obtain an
exemption from offering the plan if the employer offers a qualified retirement
plan, including, but not limited to, a plan qualified under Section 401(a), 401(k),
403(a), 403(b), 408(k), 408(p), or 457(b) of the Internal Revenue Code (U.S.C.
title 26);
(8) Mandate the contents and frequency of required disclosures to
employees, employers, and other plan participants. These disclosures must
include, but need not be limited to:

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(A) The benefits and risks associated with making contributions to
the plan;
(B) Instructions for making contributions to the plan;
(C) How to opt out of the plan;
(D) How to participate in the plan with a level of contributions
other than the default rate;
(E) The process for withdrawal of retirement savings;
(F) How to obtain additional information about the plan;
(G) That employees seeking financial advice should contact
financial advisers, that participating employers are not in a position to
provide financial advice, and that participating employers are not liable for
decisions employees make pursuant to this part;
(H) That the plan is not an employer-sponsored retirement plan;
and
(I) That the plan accounts and rate of return are not guaranteed
by the state; and
(9) Establish civil penalties for the employer's noncompliance with its
participation in the plan as provided in this part.
8-5-306.
(a) Notwithstanding another law to the contrary, the state shall not
disclose personal information about a participant or beneficiary of a participant
obtained in connection with an account established under this part, except under
the following circumstances:
(1) To an individual or entity authorized by the respective
participant or beneficiary;

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(2) In compliance with a subpoena or a court order;
(3) To the comptroller of the treasury or the comptroller's
designee for the purpose of an audit;
(4) To the internal revenue service or the United States
department of the treasury;
(5) To the participant's employer as may be necessary to
administer the plan; or
(6) In an administrative proceeding or court action involving the
state, the department of treasury, the state treasurer, or the board relative
to an account established under this part.
(b) As used in this section, "personal information" includes, but is not
limited to:
(1) Social security numbers;
(2) Bank account numbers;
(3) Transit routing numbers;
(4) Credit card numbers;
(5) Debit card numbers;
(6) Business or residential addresses;
(7) Telephone numbers;
(8) Email addresses;
(9) Amounts contributed; and
(10) Earnings on amounts contributed.
(c) Notwithstanding a law to the contrary and except as provided in
subsection (d):

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(1) All assets, income, and distributions of the plan are protected
against the claims of creditors of the state, plan administrator, and plan
participants, and are not subject to execution, attachment, garnishment,
the operation of bankruptcy, the insolvency laws, or other processes; and
(2) An assignment of the items described in subdivision (c)(1) is
not enforceable in a court.
(d) The board may adopt rules as provided in § 8-5-303(b)(2) to permit
the plan to honor claims under a qualified domestic relations order. As used in
this subsection (d), "qualified domestic relations order" has the same meaning as
provided in § 414(p) of the Internal Revenue Code of 1986 (26 U.S.C. § 414(p)).
However, such an order may only relate to the provision of marital property rights
relating to the plan for the benefit of a plan participant's former spouse.
8-5-307.
(a) The Tennessee retirement savings plan administrative fund is
established in the state treasury, separate and distinct from the general fund.
Interest earned by the Tennessee retirement savings plan administrative fund
must be credited to the fund. Moneys in the fund are continuously appropriated
to the Tennessee retirement savings board.
(b) The Tennessee retirement savings plan administrative fund consists
of:
(1) Moneys appropriated to the fund by the general assembly;
(2) Moneys transferred to the fund from the federal government,
other state agencies, or local governments;
(3) Moneys from the payment of fees and the payment of other
moneys due the board;

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(4) Any gifts or donations made to the state of Tennessee for
deposit in the fund; and
(5) Earnings on moneys in the fund.
(c) The board may use the moneys in the fund to pay the administrative
costs and expenses of the board and the plan developed under § 8-5-303 and for
any other purpose described in this part.
8-5-308.
(a) Before establishing a plan developed under § 8-5-303, the
Tennessee retirement savings board shall:
(1) Conduct a market analysis to determine:
(A) The feasibility of the plan; and
(B) Whether and to what extent plans with the
characteristics described in § 8-5-304 currently exist in the private
market;
(2) Obtain legal advice regarding the applicability of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.) and
the Internal Revenue Code (U.S.C. title 26) to the plan;
(3) Investigate whether employers that are not required to
participate in the plan can make the plan available to their employees;
(4) Investigate whether individuals who are self-employed as
independent contractors can participate in the plan; and
(5) Investigate how to allow individuals who are not automatically
enrolled in the plan to opt in to the plan and make contributions to an
account, either through payroll contributions or another method of
contribution.

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(b) The board shall coordinate with the efforts of other states as those
states pursue legal guidance for similar retirement savings programs.
8-5-309.
The Tennessee retirement savings board shall report no later than
February 1 each year to the governor and to the finance, ways and means
committees of the senate and the committee of the house of representatives
having jurisdiction over retirement issues detailing the board's activities.
8-5-310.
(a) Except for retirement plans offered by a local government to its
independent contractors on the effective date of this act, a local government shall
not establish or offer a retirement plan for persons not employed by a
governmental entity.
(b) As used in this section, "local government" means a Tennessee local
governmental entity, including, but not limited to, a municipality, metropolitan
government, county, utility district, school district, public building authority, and
development district created and existing pursuant to the laws of this state, or an
instrumentality of government created by one (1) or more of the local
governmental entities described in this subsection (b) or by an act of the general
assembly.
8-5-311.
Each state agency that enters into an interagency agreement with the
Tennessee retirement savings board to provide outreach, technical assistance,
or compliance services shall collaborate with other state agencies to develop a
plan to provide these services to the board. This plan must be provided to the
board no later than July 1, 2027.

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8-5-312.
The Tennessee retirement savings board shall report to the finance, ways
and means committee of the senate and the committee of the house of
representatives having jurisdiction over retirement issues no later than July 1,
2027. The report must include:
(1) The results of the market analysis sought by the board under
§ 8-5-308(a)(1);
(2) The findings from legal advice obtained by the board under §
8-5-308(a)(2);
(3) An analysis of potential costs to employers, including
administrative costs, associated with providing automatic payroll
deductions for participation in the plan, and recommendations on how to
eliminate or reduce those costs through incentives, tax credits, or other
means;
(4) A draft of the request for proposals to solicit bids from plan
administrators;
(5) A timeline for implementation of the plan developed under § 8-
5-303;
(6) An overview of any contracts entered into by the board in the
performance of its duties; and
(7) Recommendations to the general assembly regarding ways to
increase financial literacy in this state.
8-5-313.
(a) Except as provided in subsection (b), the Tennessee retirement
savings board shall establish the retirement plan developed under § 8-5-303 so

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that individuals may begin making contributions to the plan no later than January
1, 2029.
(b) If the board determines that the plan developed by the board under §
8-5-303 would qualify as an employee benefit plan under the Employee
Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.), then the
board shall not establish the plan.
(c) Subject to this part:
(1) Beginning January 1, 2029, a resident of this state employed
for compensation in this state with a private employer employing more
than one hundred (100) employees is eligible to participate in a defined
contribution retirement plan established by the Tennessee retirement
savings board under this part;
(2) Beginning January 1, 2030, a resident of this state employed
for compensation in this state with a private employer employing between
twenty-five (25) and one hundred (100) employees is eligible to
participate in a defined contribution retirement plan established by the
Tennessee retirement savings board under this part;
(3) Beginning January 1, 2031, a resident of this state employed
for compensation in this state with a private employer that has between
five (5) and twenty-four (24) employees is eligible to participate in a
defined contribution retirement plan established by the Tennessee
retirement savings board under this part; and
(4) Prior to an employer's participation in the plan, the employer
shall register with the board to determine whether the employer is
required to participate in the plan.

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SECTION 2. Tennessee Code Annotated, Section 4-29-249(a), is amended by adding
the following as a new subdivision:
( ) Tennessee retirement savings board, created by § 8-5-302;
SECTION 3. This act takes effect upon becoming a law, the public welfare requiring it.