FFR 278 – MN Secure Choice 401(k) Program

As Minnesota rolls out its new retirement mandate, it’s becoming increasingly important for business owners to understand what’s required, and what options are available. If you have five or more employees and don’t currently offer a retirement plan, this may apply to you. What is the Minnesota Secure Choice program? Does the rollout affect your business? And how does it compare to establishing your own 401(k)? If you’re unsure how this mandate impacts your company, we strongly recommend you watch this week’s Financial Flash Report and get up to speed.

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FFR 278 – MN Secure Choice Program – 2026

A presentation by Krisine and Rachel:

Speaker 1:
Minnesota has introduced a new retirement mandate that affects many business owners. The goal is simple — if you don’t offer a retirement plan, the state wants your employees to have a way to save through payroll deduction.

Speaker 2:
And today we want to walk through three things:
First, who this actually applies to.
Second, what the state option looks like.
And third, why many business owners may want to seriously consider a 401(k) instead.

Speaker 1:
This comes from the Minnesota Secure Choice Retirement Program, which became law in 2023. It applies to Minnesota employers with five or more employees who don’t already offer a retirement plan.

Speaker 2:
So if you already offer something like a 401(k), SIMPLE IRA, or SEP, you’re generally exempt. You just need to register that exemption with the state.

Speaker 1:
But if you don’t have a plan in place, Minnesota requires you to either enroll in the state-run program or put your own plan in place.

Speaker 2:
One of the first questions we get is when does this apply to me?

Speaker 1:
The rollout is phased between 2026 and 2028, based on employer size. Larger employers go first, smaller employers later.

Speaker 2:
You’ll get notice from the state when your window opens, and the key takeaway is — this is coming, and ignoring it can result in penalties.

Speaker 1:
So what exactly is the state program?

Speaker 2:
It’s a state-facilitated payroll-deduction IRA. Employees are automatically enrolled at a 5% contribution rate, and it’s a Roth IRA by default, with a traditional option available.

Speaker 1:
And employees can opt out or change their contribution at any time.

Speaker 2:
From the employer side, it’s intentionally simple — no employer contributions, no plan design decisions. You’re mainly running payroll deductions.

Speaker 1:
That simplicity is also where the limitations come in.

Speaker 2:
Right. As a business owner, you can’t contribute, contribution limits are much lower than a 401(k), there’s no matching or profit sharing, and it has minimal impact on recruiting or retention.

Speaker 1:
So Secure Choice checks the compliance box, but it’s not really a benefit strategy — it’s a savings outlet.

Speaker 2:
And that’s why many owners end up looking seriously at a 401(k).

Speaker 1:
A 401(k) isn’t just a way to avoid the mandate — it’s a business and tax planning tool.

Speaker 2:
You get much higher contribution limits, which lets owners shelter significantly more income on a tax-advantaged basis.

Speaker 1:
And employer contributions may be tax-deductible, so instead of sending those dollars to the IRS, you’re redirecting them into a benefit for your team — and often yourself.

Speaker 2:
Plus, many small businesses qualify for startup tax credits, which can help offset setup and administrative costs.

Speaker 1:
And beyond taxes, a 401(k) is a real recruiting and retention tool. It signals stability, long-term investment, and it’s a benefit employees recognize.

With today’s providers and pooled plans, 401(k)s are also far simpler and more affordable than they used to be — often costing less than employee turnover.

Speaker 1:
So here’s a simple way to think about it.

Speaker 2:
If your goal is do the minimum and move on, the state program may be fine.

Speaker 1:
But if your goal is to build a real benefit, reward your team, and maximize your own retirement savings, a 401(k) is often the better long-term move.

Speaker 2:
The most important thing is not waiting until your deadline shows up.

Speaker 1:
This mandate isn’t just about compliance — it’s an opportunity to turn a requirement into something that benefits your business.

Speaker 2:
And the best next step is starting the conversation early, before the mandate forces a rushed decision.