Minnesota now requires most employers that offer no retirement plan to enroll their workers in a state-run savings program. The Minnesota Secure Choice Retirement Program, enacted in 2023 and reaching employers in 2026, makes a covered employer automatically enroll its employees and forward payroll deductions to state-administered individual retirement accounts. Under Minn. Stat. § 187.05, the contributions come entirely from the employee’s own wages; the employer collects and transmits them. If you already sponsor a 401(k) or another qualifying plan, the mandate does not reach you. This sits alongside the other Minnesota employment law obligations facing employers, and the early questions I hear from business owners are almost always the same three: do I have to do this, what if I already have a plan, and what is my exposure.

What is the Minnesota Secure Choice Retirement Program?

The Minnesota Secure Choice Retirement Program is a state-facilitated automatic-IRA program for private-sector workers whose employers offer no retirement plan. Under Minn. Stat. § 187.05, subdivision 1, the program board operates a savings arrangement “whereby employee payroll deduction contributions are transmitted on an after-tax or pretax basis by covered employers to individual retirement accounts established under the program.” Contributions default to a Roth (after-tax) basis unless the employee elects pretax.

The design is deliberately narrow for the employer. The state runs the program, picks the investments, and holds the money in trust. The employer’s job is to plug its workers in and move their deductions through. The Minnesota Legislature passed the program in 2023, and it began reaching employers in 2026. For business owners, the practical question is rarely whether the law exists; it is whether their company is a covered employer and what that requires.

Which Minnesota employers must participate in Secure Choice?

A covered employer is a Minnesota business or nonprofit that has been engaged in business in the state at any time in the past 12 months, employs five or more covered employees, and has not offered a retirement plan in the past year. Minn. Stat. § 187.03, subdivision 6, defines a covered employer as one “engaged in a business, industry, profession, trade, or other enterprise in Minnesota,” that “employs five or more covered employees,” and that “does not sponsor or contribute to and did not in the immediately preceding 12 months sponsor or contribute to a retirement savings plan for its employees.” The same subdivision excludes an employer that “has not engaged in a business . . . in Minnesota . . . at any time during the immediately preceding 12 months,” along with any federal, state, or local government employer. A new company is not outside the mandate just because it has run for less than a year; what matters is whether it has done business in Minnesota at all within the past 12 months.

Two thresholds decide the question. The first is headcount: five or more covered employees. A covered employee, under subdivision 5, is generally anyone the company employs in Minnesota, with carve-outs for workers under 18 as of the prior December 31, certain railroad and Taft-Hartley workers, and government employees. The second threshold is the plan test, which is where most employers find their answer. If you have run any retirement plan in the past 12 months, you fall outside the definition entirely. When you operate across related entities, how the count works across related entities can change the answer, so it is worth confirming before you assume you are under or over the line.

What if I already offer a 401(k) or other retirement plan?

If you sponsor or contribute to a qualifying retirement plan, you are not a covered employer, and you do not enroll in Secure Choice. The exemption is built into the covered-employer definition: an employer that already offers a plan is excluded from the mandate. Minn. Stat. § 187.03, subdivision 10, defines the qualifying “retirement savings plan” to include “a plan described in section 401(a) of the Internal Revenue Code,” a “403(a) or 403(b)” annuity, “a plan within the meaning of section 457(b),” a “simplified employee pension (SEP) plan,” a “savings incentive match plan for employees (SIMPLE) plan,” an “automatic enrollment payroll deduction individual retirement account,” and a multiemployer pension plan.

The list is broad, and that is the point: the program targets the coverage gap, not employers who already provide a plan. Practically, an exempt employer is not simply left alone. Minnesota expects you to file an exemption confirming that you offer a qualifying plan, rather than ignore the notices that arrive during your enrollment phase. In my practice, the most common confusion is an employer that dropped a plan during a lean year and assumes it is still exempt; the 12-month look-back in subdivision 6 means a lapsed plan can pull you back into covered-employer status.

How does Secure Choice auto-enrollment and employee opt-out work?

Auto-enrollment means the default is participation, and the employee, not the employer, controls the exit. Minn. Stat. § 187.07, subdivision 1, requires each covered employer to “enroll its covered employees in the program and withhold payroll deduction contributions from each covered employee’s paycheck, unless the covered employee has elected not to contribute.” Enrolled employees start at a default contribution rate set by the program, which rises automatically each year.

The opt-out belongs entirely to the worker. Under Minn. Stat. § 187.05, subdivision 4, every covered employee has the right “to change the contribution rate, opt out or elect not to contribute, or cease contributions.” The employer does not decide who participates or judge an employee’s election. You enroll everyone, then honor each person’s choice on the payroll side: withhold for those who stay in, stop for those who opt out. The current program parameters set the starting deduction at 5 percent of pay, escalating one point a year toward an 8 percent cap, though the board can adjust those figures.

What exactly must a covered employer do?

A covered employer has three duties, and only three. Minn. Stat. § 187.07 lays them out in sequence: enroll covered employees and withhold their elected contributions (subdivision 1); “timely remit contributions as required by the board” (subdivision 2); and distribute the board’s program information to employees. On the third duty, subdivision 3 requires that the information reach each covered employee “at least 30 days prior to the date of the first paycheck from which employee contributions could be deducted.” The board prepares the materials; you hand them out.

That is the whole list. You do not choose investments, set contribution rates, design the plan, or field investment questions. The work is payroll mechanics, and it lives next to the duties you already run, from final-paycheck timing to your PTO and wage policies. Folding the Secure Choice steps into your existing payroll process, and noting them in your employee handbook, keeps the obligation from becoming a separate project.

How is Secure Choice funded, and who pays in?

Secure Choice is funded entirely by employee payroll deductions. The employer pays nothing into it. Minn. Stat. § 187.05, subdivision 1, describes the money as “employee payroll deduction contributions” that the employer transmits to the employee’s account. Employer contributions are not permitted, and the program charges employers no fees. The withheld wages flow into the worker’s own individual retirement account.

The account belongs to the employee from the first dollar. Subdivision 5 provides that “covered employees are 100 percent vested in their accounts at all times.” There is no employer match, no vesting schedule, and no employer money at risk. This is a sharp contrast with the benefit programs that do cost you, such as Minnesota’s paid family and medical leave program. Secure Choice asks for your administrative effort, not your dollars.

A covered employer’s exposure is narrow by statute. Minn. Stat. § 187.07, subdivision 4, provides that beyond the three operating duties, “a covered employer has no obligations to covered employees and is not a fiduciary for any purpose under the program,” and is “not responsible for the administration, investment performance, plan design, or benefits paid to covered employees.” Subdivision 5 adds that an employer “is not liable to a covered employee for damages alleged to have resulted from a covered employee’s participation in or failure to participate in the program.”

The program reinforces those lines in its own materials. Under Minn. Stat. § 187.08, the board’s required disclosures tell employees that neither the employer nor the state is “liable for decisions covered employees make regarding their account,” and that workers “seeking financial, investment, or tax advice should contact their own advisors.” Your residual risk is operational, not fiduciary: it comes from failing to do the three things the statute requires, not from how the investments perform. Run the payroll steps correctly and the liability picture stays small.

How does Secure Choice keep employers out of ERISA?

Secure Choice is a state-run program, not an employer-sponsored plan, so the employer carries none of the fiduciary, reporting, and administration burdens that come with a 401(k). The Employee Retirement Income Security Act (“ERISA”) governs employer-sponsored retirement plans, and the non-fiduciary language in Minn. Stat. § 187.07, subdivision 4, is the state’s way of keeping the employer outside that framework. The accounts are the employees’ own IRAs, held in a state trust, not a plan you establish.

The leading federal decision on this model agrees. In Howard Jarvis Taxpayers Ass’n v. California Secure Choice Retirement Savings Program, 997 F.3d 848 (9th Cir. 2021), the Ninth Circuit held that California’s auto-IRA program, the template Minnesota followed, “is not an ERISA plan because it is established and maintained by the State, not employers; it does not require employers to operate their own ERISA plans.” That decision is persuasive rather than binding in Minnesota, but it addresses the same structure. If your goal is to take on the fiduciary duties that come with running your own ERISA plan, Secure Choice is not that; it is the opposite.

What happens if an employer ignores the Secure Choice mandate?

A covered employer that ignores the mandate faces civil penalties, but not without warning. Minn. Stat. § 187.07, subdivision 6, authorizes the board to “impose statutory civil penalties against any covered employer that fails to comply” with the duties to enroll, remit, and distribute information, and provides that “the attorney general shall enforce the penalties” at the board’s request. Penalty proceeds go to the program’s administrative fund.

The statute builds in a grace period. Subdivision 6 directs the board to “provide covered employers with written warnings for the first year of noncompliance before assessing penalties.” So the realistic risk for an employer that is late or confused is a warning and a chance to fix the problem, not an immediate fine. The exposure grows only if the warnings are ignored. That structure rewards getting your enrollment process in order early, even if your phase has not arrived.

When does Secure Choice take effect for my business?

The mandate is law now; for most employers, the open question is timing. The Legislature enacted Secure Choice in 2023; by law the program could not begin operating before 2025, and it opened to employers in 2026. The mechanics the employer must run live in Minn. Stat. § 187.05 and the surrounding sections of chapter 187. Minnesota is phasing employers in by size, starting with the largest, so each covered employer registers or files an exemption when its assigned phase arrives.

For a CEO, the takeaway is to find your phase and decide your path before the notice lands. If you already offer a plan, you file an exemption. If you do not, you set up the payroll steps and the employee notice. This is one more entry on a growing list of Minnesota employer requirements, from earned sick and safe time to pay transparency in job postings, and the companies that handle it well treat it as a calendar item rather than a surprise.

Do I have to enroll in Secure Choice if I offer a SIMPLE IRA?

No. A SIMPLE IRA is a qualifying retirement savings plan under Minnesota law, so you are not a covered employer. Instead of enrolling, you file an exemption confirming that you already offer a qualifying plan. The same is true for a 401(k), a 403(b), a SEP, or a 457(b) plan.

Does Secure Choice count my part-time employees toward the five-employee threshold?

Generally yes. Coverage turns on employment with a Minnesota employer, not on hours worked. Narrow groups are excluded, including workers under 18, certain railroad and Taft-Hartley employees, and government workers. Most part-time Minnesota employees count toward the five-employee threshold and get enrolled.

Can an employee sue me if their Secure Choice investments lose money?

No. Minnesota law states that a covered employer is not liable to an employee for damages from participating or not participating in Secure Choice, and is not responsible for investment performance. You are not a fiduciary. The account is the employee’s own IRA, and investment results are between the employee and the program.

What if my employee wants to opt out of Secure Choice?

The employee opts out directly through the program, and you stop withholding for that person. Every covered employee keeps the right to opt out, change the contribution rate, or stop contributing. You do not approve or deny the choice; you carry it out on the payroll side.

Do I owe Secure Choice contributions out of my own pocket?

No. Employers are not permitted to contribute to Secure Choice, and the program charges no employer fees. Your role is to withhold the amount the employee elects and forward it. The money is the employee’s, deducted from the employee’s own wages, not an expense you pay.

Should I keep my 401(k) or switch employees to Secure Choice?

That is a business and tax decision, not a Secure Choice requirement. Keeping a qualifying plan exempts you from the mandate entirely. Secure Choice is the baseline for employers that offer no plan, not a substitute for a 401(k) you already run. A 401(k) also allows employer matching, which Secure Choice does not.

Will I get a warning before Secure Choice penalizes me?

Yes. The Secure Choice board must give covered employers written warnings during the first year of noncompliance before assessing any penalty. The attorney general enforces penalties only after the board imposes them. The structure gives employers a runway to come into compliance before money is at stake.

Secure Choice changes the default for Minnesota employers without a retirement plan: enroll your workers, move their deductions, hand out the notice, and stay out of the way of the investments. If you already sponsor a 401(k) or another qualifying plan, your task is to file the exemption and keep the plan current. The exposure for getting it wrong is real but measured, with a first-year warning built into the law. As you sort Secure Choice alongside the broader wave of Minnesota employer mandates, the early decision is simple to frame: are you exempt, or are you enrolling? If you would like a second set of eyes on which side of the line your company falls, or on how Secure Choice fits with the plan you already offer, email [email protected] with a short description of your workforce. Plan documents and other confidential materials should be shared only through a secure method after we complete an intake and conflict check.