Purpose

This bill amends Minnesota law governing the Minnesota deferred compensation plan. It clarifies definitions, enrollment options, annual fee disclosures, who can participate, and how employer contributions and loan-related matches work. It also allows certain types of contributions from leave and ties some employer matching to limits in federal tax rules and recent federal law.

Key Definitions and Scope

• Deferred compensation plan: a plan that meets the requirements in this section and falls under the Minnesota deferred compensation framework or related federal tax-sheltered plans (like 403(b) or 457(b)).
• Plan administrator: the person or entity named in the plan document as administrator for the Minnesota plan or a 457(b) plan.
• Vendor: the provider of an annuity contract, custodial account, or retirement income account under a tax-sheltered annuity plan (403(b)).
• Enrollment: enrollment in the plan is available through one of three routes—an employer’s personnel policy, a collective bargaining agreement, or an individual employment contract (e.g., between a city and a city manager, or between a school district and a superintendent or other management employee).
• Coverage: the plan covers employees of school districts, state agencies, or other governmental subdivisions. It may cover city managers in certain alternate retirement arrangements but does not cover employees of the Board of Trustees of Minnesota State Colleges and Universities who are covered by another state retirement plan.

Main Provisions

• Annual fee and return disclosures

  • For each investment fund offered (except for self-directed brokerage accounts or fixed annuities), the plan administrator or vendor must annually provide a clear statement showing all fees that affect returns (administrative, maintenance, and investment fees) and the fund’s prior performance over 1, 5, and 10 years (or the fund’s life if shorter).
  • The plan administrator or vendor must file a copy of this annual statement with the executive director of the Legislative Commission on Pensions and Retirement.

• Enrollment pathways and coverage

  • Enrollment is provided via one of three mechanisms: an employer’s personnel policy, a collective bargaining agreement, or an individual employment contract.
  • The plan covers employees of a school district, state agency, or other governmental subdivision. It may cover city managers under certain alt retirement arrangements but must not cover employees of the Board of Trustees of Minnesota State Colleges and Universities (who are covered by a separate Higher Education Supplemental Retirement Plan).

• Employer contributions and student loan matching

  • If the public employer makes matching contributions, the match must be dollar-for-dollar with the employee’s elective deferrals, up to the lesser of: 1) the maximum allowed by the enrollment policy, or 2) one-half of the annual limit on elective deferrals under section 402(g) of the Internal Revenue Code.
  • Instead of or in addition to matching, the employer can make matching contributions on behalf of an employee for qualified student loan payments as defined in the federal Secure 2.0 Act of 2022 (Public Law 117-328, Division T, section 110(b)).
  • The total employer matching contributions for student loan payments plus any matching contributions that correspond to the employee’s deferrals must not exceed the lesser of: 1) the maximum allowed by the enrollment policy, or 2) one-half of the annual deferral limit under section 402(g), or 3) the employee’s annual compensation.

• Contributions from leave (sick/vacation/severance)

  • Contributions may be made to the plan from the employee’s sick leave, vacation leave, or accumulated severance pay, whether labeled as employee contributions or as nonelective employer contributions.
  • Such contributions are subject to applicable limits under the Internal Revenue Code but are not counted toward the matching requirements or limits described above.

• Other technical definitions

  • The bill references common retirement and tax concepts (e.g., Internal Revenue Code sections 403(b) and 457(b), 402(g)) and notes alignment with federal law like the Secure 2.0 Act for student loan matching.

Significant Changes Compared to Current Law

• Expands enrollment and coverage rules to clearly define who can participate (school districts, state agencies, other governmental subdivisions) and under what conditions city managers may be included.
• Introduces mandatory annual fee-and-performance disclosures for investment funds, increasing transparency for participants.
• Creates a clear framework for dollar-for-dollar employer matching with a cap tied to the 402(g) deferral limit, and allows employer contributions for qualified student loan payments under the Secure 2.0 Act, with specific annual caps.
• Allows employer and employee contributions to be derived from employee leave (sick, vacation, severance) and clarifies that these contributions can count toward plan limits but may be exempt from the required match.
• Excludes employees of the Board of Trustees of Minnesota State Colleges and Universities from participating in this plan (they remain under a separate Higher Education Supplemental Retirement Plan).
• Requires annual reporting to a state legislative oversight body, increasing accountability.

Practical Implications for Participants

• More transparent disclosures about investment costs and performance.
• More explicit enrollment pathways, which could affect how employees join the plan.
• Potentially more generous or varied employer contributions, including student loan repayment matching, within federal-imposed limits.
• Possibility to contribute through Pay deductions tied to leave balances in addition to traditional deferrals.

Relevant Terms - deferred compensation plan - plan administrator - vendor - enrollment - public employer - employee elective deferral contributions - matching contributions - dollar-for-dollar match - one-half of the annual limit on elective deferrals - section 402(g) of the Internal Revenue Code - qualified student loan payments - Secure 2.0 Act of 2022 (Public Law 117-328, Division T, section 110) - sick leave - vacation leave - severance pay - Internal Revenue Code (IRC) sections 403(b) and 457(b) - self-directed brokerage account - fixed annuity contract - executive director, Legislative Commission on Pensions and Retirement - Minnesota State Colleges and Universities; Higher Education Supplemental Retirement Plan (chapter 354C) - personnel policy; collective bargaining agreement; individual employment contract