Minnesota Retirement Mandate: Secure Choice for Employers
Minnesota Secure Choice makes employers with no retirement plan auto-enroll staff in a state Roth IRA. Deadlines, penalties, and the 401(k) option.
A shop owner in Saint Paul sent me a photo of a letter with an access code on it and one question underneath: do I now have to run a retirement plan. The answer was no. What the letter actually asked for was a payroll deduction and a registration, which is a much smaller thing wearing a much bigger coat.
Minnesota decided that employers could help close the retirement savings gap without paying for it. If you run payroll in the state and sponsor no plan of your own, the expectation is that you plug your people into the state program, a payroll deduction individual retirement account (IRA).
You put in no money, you choose no investments, and the statute says in plain words that you are not a fiduciary. What follows is who the mandate reaches, the staged windows and where the penalties end up, how the auto-IRA behaves once deductions start, and the honest case for sponsoring a 401(k) instead.
I build the people and records tooling for businesses without an HR department at FirstHR, which is an onboarding and HR platform rather than a payroll or retirement provider. This is general information, not tax or legal advice.
What Secure Choice Is
The Minnesota Secure Choice Retirement Program is a state-facilitated payroll deduction IRA that covered employers must offer unless they sponsor a retirement plan themselves. It was written into law in 2023 and opened to employer registration in January 2026, overseen by a state board with an outside record keeper running the day to day (Minnesota Secure Choice employer fact sheet).
Minnesota is one of 17 states that have enacted an auto-IRA program like this one, according to Georgetown University’s Center for Retirement Initiatives (September 2026), and the mechanics are similar across most of them without matching exactly.
Who Has to Register
Three tests decide it, and all three have to be true at once. Minnesota Statutes 187.03 defines a covered employer as one engaged in business in the state, employing five or more covered employees, that does not sponsor or contribute to a retirement savings plan and did not in the immediately preceding twelve months (Minnesota Office of the Revisor of Statutes).
Part-time people count toward the number, which surprises employers who assume the mandate is aimed at full-time payrolls. The filtering happens in the covered employee definition instead, and it is narrower than most owners expect: it removes minors, short-term seasonal hires, and workers under specific federal labor regimes, not everybody who works reduced hours.
Because coverage can arrive that quietly, write the answer down each time you work it out rather than carrying it in your head. The record below holds the count behind the headcount test, the two dates the other tests turn on, and the conclusion you reached, so the next person to ask can see how you got there.
The Registration Windows
Minnesota staged its deadlines by employer size rather than setting one date for everybody, with the largest payrolls registering first. Employers of any size could register voluntarily from January 2026, and each compliance window closes for good once it passes (Minnesota Secure Choice Retirement Board).
| Employer size | Window opens | Window closes |
|---|---|---|
| Any size, voluntary | January 19, 2026 | March 30, 2026 |
| 100 or more employees | April 1, 2026 | June 30, 2026 |
| 50 to 99 employees | July 1, 2026 | December 31, 2026 |
| 25 to 49 employees | January 1, 2027 | June 30, 2027 |
| 10 to 24 employees | July 1, 2027 | December 31, 2027 |
| 5 to 9 employees | January 1, 2028 | June 30, 2028 |
The program placed each employer in one wave, using the total employee count in the data it held as of January 2026. If you were covered during your wave and let it pass, you are late, and the sensible move is to register now instead of waiting for a prompt.
Businesses that become covered later get their own window rather than inheriting a closed one. The statute gives an employer that first meets the definition a twenty-one day enrollment window beginning on January 1 after the calendar year in which that happened, which is the provision that catches a growing payroll crossing five people long after the staged dates have run.
These are one-off staged dates, not a recurring annual cycle. That distinction matters more than it sounds. A missed window does not come around again next year, and the penalty clock in the statute runs from the last day of your enrollment window rather than from the date somebody notices.
What Ignoring It Costs
Minnesota attached real per-employee money to noncompliance, and it escalates every year. Nothing lands in the first two years, because the board must issue written warnings across that period.
The 2026 amendments to chapter 187 kept the amounts and changed when the clock starts (Laws 2026, chapter 106, article 9). For a failure to enroll, it starts on the last day of your enrollment window. For a failure to start withholding, it starts on the first paycheck after an employee’s waiting period ends, and the same penalty amounts apply.
There is a second, sharper penalty for a different failure. If you withhold contributions from paychecks and do not send them to the program, the executive director makes a written demand for immediate remittance with interest.
Willful and intentional failure to remit within ten days of that demand is a misdemeanor. A second demand brings a mandatory $250 penalty for each employee contribution withheld but not transmitted.
The withheld-money penalty deserves a moment. Money deducted from wages and not forwarded is not a filing lapse. It is somebody else’s savings sitting in your operating account. Treat the remittance step with the same care as your other payroll deductions and this never becomes an issue.
How the Auto-IRA Behaves
The defaults do nearly all the work. An employee who reads nothing and decides nothing ends up saving 5 percent of pay into a Roth IRA, with the rate stepping up each year of participation until it reaches 8 percent and stops.
The escalation is written into the statute rather than left to the program. Minnesota Statutes 187.07, subdivision 1a, sets the default at 5 percent of pay in the first year of participation, 6 percent in the second, 7 percent in the third, and 8 percent in the fourth and after.
The board can change those rates and the schedule, but only with six months of advance notice to employers and employees.
Contributions go in on an after-tax Roth basis unless the employee elects pretax, which the program supports through a traditional IRA option. Roth by default matters for payroll because the deduction does not reduce taxable wages, and it matters for high earners because federal Roth eligibility phases out with income.
Federal IRA limits also cap the whole arrangement well below what a workplace plan allows. For 2026 the IRA contribution limit is $7,500 with a $1,100 catch-up at age 50 and over, against a 401(k) elective deferral limit of $24,500 with an $8,000 catch-up (Internal Revenue Service, 2026 cost-of-living adjustments).
Roth eligibility adds a second limit for higher earners. For 2026 the income phase-out for single filers runs between $153,000 and $168,000 (Internal Revenue Service, 2026 cost-of-living adjustments).
Employees stay in control throughout. The statute gives them the right to change the rate, decline an increase, stop contributing, or opt out entirely, at least annually and more often if the board allows, and the account belongs to them and travels with them when they leave. Nothing about that conversation is yours to manage.
Your Payroll Role, and Where It Stops
Your job is three verbs: enroll, deduct, remit. Everything that looks like running a retirement plan, from investment selection to distributions to answering what somebody should do with their money, belongs to the program instead.
It used to be four verbs, with distribute as the fourth. Employers were once required to hand each covered employee the board-prepared program information within fourteen days of their first day, with its own penalty attached. Minnesota repealed that duty effective May 20, 2026, and the board now issues the notice directly, no later than seven days after an employee is enrolled.
The fiduciary line is the point of the whole design, and Minnesota drew it explicitly. Apart from the listed responsibilities, a covered employer has no obligations to covered employees and is not a fiduciary for any purpose under the program, and bears no responsibility for its administration, investment performance, plan design, or benefit distributions (Minn. Stat. 187.07).
Compare that with sponsoring a plan. A 401(k) sponsor is a fiduciary under federal law with genuine duties around prudence, fees, and ongoing monitoring, which is why ERISA obligations absorb so much of a plan sponsor’s attention. The state program is built specifically to keep you outside that role.
In practice the effort is front-loaded. Registration and the first roster upload take real time. After that it is keeping employee records accurate as people join, leave, and change their minds, which is the same discipline that already underpins your benefits administration.
Dwight SchruteSales3 people
Darryl PhilbinWarehouse1 person
Kelly KapoorCustomer Service1 personSponsoring a 401(k) Instead
Offering your own plan takes you out of the mandate entirely, because sponsoring or contributing to a retirement savings plan is exactly what the covered employer definition excludes. You file an exemption through the employer portal rather than registering, and you own the retirement conversation from then on.
The federal tax code makes this cheaper than most owners assume. The retirement plans startup costs credit covers a share of qualified setup and administration costs, worth up to $5,000 a year for three years, with the full percentage available to the smallest employers.
A separate credit of $500 a year for three years applies for adding automatic enrollment (Internal Revenue Service, retirement plans startup costs tax credit).
What you take on in exchange is real and recurring. You become the plan sponsor and a fiduciary, and you generally file Form 5500 each year.
The other recurring job is testing. Unless the plan uses a safe harbor design (required employer contributions that exempt it from testing), you run nondiscrimination testing annually and live with corrective distributions, meaning money returned to employees, when it fails.
The reasons to accept that trade are usually about ambition rather than compliance. A workplace plan lets employees defer more than triple the IRA limit, lets you put employer money behind it, and lets you use design features the state program has no concept of.
The Two Routes Side by Side
The state program is cheaper for you and weaker for your employees. A sponsored plan is the reverse. Laid out row by row the trade is easy to see.
| Dimension | Minnesota Secure Choice | Your own 401(k) |
|---|---|---|
| Employer contribution | Not permitted | Optional, and required under a safe harbor design |
| Cost to the employer | No program fees | Provider fees plus any employer contribution |
| Employer fiduciary duty | None under the program | Yes, you are the plan sponsor |
| Annual federal filing | None from you | Generally Form 5500 |
| Nondiscrimination testing | None | Yes, unless the plan is safe harbor |
| Employee contribution ceiling | IRA limit, $7,500 for 2026 | Deferral limit, $24,500 for 2026 |
| Default account type | Roth IRA, with a pretax election available | Pretax or Roth, by plan design |
| Federal startup tax credit | Not applicable | Up to $5,000 a year for three years |
| Setup effort | Registration and a payroll file | Plan document, provider selection, ongoing administration |
Federal rules have moved steadily toward making small employer plans easier and cheaper to run, which changes this calculation over time. If you dismissed a 401(k) as unaffordable a few years ago, the changes tracked in SECURE Act 2.0 are worth a fresh look before you assume the answer is still no.
Getting Registered
Registration is a short sequence and most of the delay comes from hunting for information rather than from the process. Gather the pieces first and the rest moves quickly.
Once you are registered the work is two running records, and both are dates. Who was enrolled and when their windows fall sits on the first tab below, and what was withheld against when it was sent sits on the second, which is the one to keep current because that failure carries its own penalty.
| A | B | C | D | E | F | G | H | I | J | K | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Employee | First day of employment | Enrollment deadline, 21 days from first day | Date enrolled | Waiting period ends, 30 days from enrollment | First paycheck after the waiting period | Rate applied | Opted out, date | Rate change, date and new rate | Termination date | Notes |
| 2 | |||||||||||
| 3 | |||||||||||
| 4 | |||||||||||
| 5 | |||||||||||
| 6 | |||||||||||
| 7 | |||||||||||
| 8 | |||||||||||
| 9 | |||||||||||
| 10 | Note | Add each new hire inside the twenty-one day window that opens on their first day | |||||||||
| 11 | Note | The board sends the program notice within seven days of enrollment, so no notice goes out from you | |||||||||
| 12 | Note | Mark leavers as terminated and push rate changes through rather than holding them in payroll |
Where Employers Slip Up
Five patterns come up repeatedly. The first is the easiest to miss, and the fourth is the most serious.
Reading the mandate as a full-time headcount test is first. Part-time employees count toward the covered employee number, so a payroll built mostly on reduced hours can clear the threshold while the owner is still assuming it does not apply.
Assuming a missed window reopens is second. These are one-off staged dates rather than an annual cycle, and the penalty ladder counts anniversaries from the last day of your enrollment window, not from the date anybody contacted you.
Skipping the exemption filing is third. Employers who already sponsor a plan are genuinely outside the mandate, but the state has no way of knowing that until you say so through the portal.
Letting withheld contributions sit is fourth, and it is the most serious. Money deducted from pay belongs to the employee, the remittance deadline is thirty days from the paycheck date, and the penalty for holding it is separate from and additional to everything else.
Answering investment questions is last. The program communicates with savers directly precisely so employers do not have to, and an owner offering a view on which fund to pick is walking toward a role the statute took care to keep them out of.
Most of these come down to the same short routine: run the three coverage tests, find your window, and keep the remittance dates in front of whoever runs payroll.
Nick Anisimov, FirstHR founder
Frequently Asked Questions
What is the Minnesota retirement mandate?
It is a state law that requires most private Minnesota employers without a retirement plan to put their employees into a payroll deduction IRA run by the state, called the Minnesota Secure Choice Retirement Program. The rules sit in Minnesota Statutes chapter 187, which passed in 2023, and the Secure Choice Retirement Board oversees the program. You are covered if you do business in Minnesota, have five or more covered employees, and do not sponsor or contribute to a retirement savings plan, now or at any point in the past twelve months. Your part is to enroll people, withhold from their pay, and send the money in. The old duty to hand out program information was repealed effective May 20, 2026, so the board now sends that notice itself. You contribute nothing, pay no program fees, pick no investments, and are not a fiduciary under the program. If you already sponsor a qualifying plan, you file an exemption instead of registering.
How many employees trigger Minnesota Secure Choice?
Five. A covered employer under Minnesota Statutes 187.03 is one with five or more covered employees, and part-time people count toward that number. The filtering happens in who counts as a covered employee. Left out are people who were under 18 on December 31 of the preceding year, people hired on a temporary or seasonal basis for a period not exceeding 180 days, government employees, employees under the Railway Labor Act, and participants in a multiemployer pension trust. Two more conditions apply alongside the headcount. The business must have been active in Minnesota during the preceding year, and it must not sponsor or contribute to a retirement savings plan, now or at any point in the previous twelve months.
When does an employer have to register for Secure Choice?
It depends on payroll size, because the state gave each size band its own deadline instead of one date for all employers. Registration opened to employers of any size on January 19, 2026, in a voluntary window that ran to March 30, 2026. The compliance deadlines then run from the largest employers to the smallest: June 30, 2026 for employers with 100 or more employees, December 31, 2026 for those with 50 to 99, June 30, 2027 for 25 to 49, December 31, 2027 for 10 to 24, and June 30, 2028 for 5 to 9. The program placed each employer in one band using the total employee count it had on record as of January 2026. You can register or file an exemption before your own deadline whenever you like.
What is the penalty for not registering for Minnesota Secure Choice?
Penalties build up year by year instead of arriving all at once. Under Minnesota Statutes 187.12, the first charge is $100 per covered employee, up to $4,000, and it applies on the second anniversary of the last day of the employer’s enrollment window. The third anniversary brings $200 per covered employee, up to $6,000, the fourth brings $300 per covered employee, and every anniversary after that brings $500 per covered employee, with no cap on those later tiers. Nothing is assessed earlier, since the board has to send written warnings during the first two years of noncompliance. Before any penalty is assessed the board must also send written notice, and the penalty is dropped if the employer fixes the problem within thirty days. A separate rule covers withheld money that is never sent: after a second written demand the penalty is $250 per contribution, and a willful failure to remit is a misdemeanor.
How much comes out of an employee's paycheck?
The default starts at 5 percent of pay and rises on a fixed schedule. Under Minnesota Statutes 187.07, subdivision 1a, an employee contributes 5 percent in year one of participation, 6 percent in year two, 7 percent in year three, and 8 percent from year four onward. The money goes in after tax, as a Roth contribution, unless the employee chooses pretax. Employees have a statutory right to change their rate, turn down an increase, stop putting money in, or leave the program altogether, at least once a year and more often if the board allows. Federal IRA rules put a ceiling on all of this: the 2026 IRA limit is $7,500, plus a $1,100 catch-up for people 50 and older, and Roth eligibility phases out for higher earners.
Do Minnesota employers have to contribute to Secure Choice?
No, and the program does not allow employer contributions at all. Every dollar in the accounts is withheld from an employee’s paycheck. That leaves no match to design, no nonelective contribution to fund, and no vesting schedule to track, and the program charges employers no fees to participate. Here is the structural difference between a state auto-IRA and a plan you sponsor yourself: the state program costs you administrative effort and a payroll integration, while a 401(k) costs money and creates obligations the state program deliberately avoids. If you want employer dollars behind retirement savings, or want owners and senior staff to defer more than an IRA allows, sponsoring your own plan is the only route that permits it.
Is a 401(k) better than the state program?
It depends on whether you want retirement savings to do anything beyond closing a compliance obligation. Sponsoring a qualifying plan exempts you from the mandate, lets employees defer far more than an IRA allows, lets you contribute employer money, and can earn federal tax credits for startup costs and for adding automatic enrollment. It also makes you responsible for the plan as its sponsor and a fiduciary under federal law, with an annual return to file and, unless the plan follows a safe harbor design, nondiscrimination testing to pass. For most small employers with no plan today the two are sequential rather than exclusive: register to close the obligation now, then revisit the plan question when hiring pressure and margins justify the cost.
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