Summary of HF 5093 (2025-2026) – Launch Account Contribution Program
Jurisdiction: Minnesota
Author: Rep. Tim O’Driscoll
Committee: State Government Finance and Policy
Status: Introduced; first reading on 04/28/2026
Purpose
- Establish a state-run program (the Launch Account Contribution Program) that allows Minnesota state employees to:
- voluntarily contribute a portion of their compensation to a Launch Account, and
- redirect any or all employer matching contributions that would have gone to the Minnesota Deferred Compensation Plan (a state employee 401(k)-style plan) to Launch Accounts instead.
- The program aims to promote long-term savings for a dependent child’s financial future, enhance financial literacy, and support intergenerational wealth without requiring new state expenditures.
Key Provisions
1) Establishment and Scope
- The Commissioner of Management and Budget must establish and maintain the Launch Account Contribution Program no later than July 4, 2026.
- The program must be available uniformly to all state employees and comply with relevant tax and payroll rules (IRC sections 128 and 530A, and related IRS regulations).
2) Definitions
- Launch Account: An account established under Internal Revenue Code section 530A.
- Deferred compensation plan: Minnesota’s deferred compensation plan established in § 352.965.
- Employer matching contribution: The employer’s matching funds to the employee’s deferred compensation plan, as allowed by policy or collective bargaining agreement.
- Pilot program contribution: A contribution to a Launch Account under IRC § 6434.
3) Purpose (Statement of Intent)
- Provide a voluntary mechanism for employees to:
- contribute a portion of compensation to a Launch Account, or
- redirect employer matching contributions to a Launch Account.
- Rationale includes strengthening family financial security, supporting state economic stability, and complementing existing retirement programs without additional state expenditure.
4) Enrollment and Account Setup
- Opening a Launch Account is required before contributions can be made.
- Elections to open an initial Launch Account are made via IRS Form 4547 or an online Launch Account portal.
- If opening is not simultaneous with a pilot contribution, the account may be opened by a legally eligible guardian or family member (priority: legal guardian, parent, adult sibling, grandparent), with the individual matching highest priority if multiple eligible parties exist.
- If opening and pilot contribution are synchronized, the future qualifying child’s relationship to the account opening party is the determining factor.
5) Contributions and Limits
- Employee and employer contributions to Launch Accounts require:
- An agreement between the employee and employer, in a format prescribed by the Commissioner.
- Employee payroll deductions must be voluntary and can be redirected from the employee’s deferred compensation plan.
- Contributions must not exceed the annual limits established by IRC § 530A(c)(2).
- Contributions must be processed within existing payroll systems where feasible.
- Employer contributions redirected to Launch Accounts under this program are not considered compensation for retirement calculations under Minnesota law (chapter 352).
6) Administration and Reporting
- The Commissioner may adopt rules to coordinate with the Department of Revenue and IRS for compliance with contribution limits and reporting.
- The program should leverage existing payroll and deferred compensation infrastructure to minimize administrative costs.
Effective Date
- The section becomes effective the day after final enactment.
Potential Impacts
- Employees:
- Opportunity to grow a tax-advantaged Launch Account for a dependent child’s future.
- Flexibility to choose how much to contribute and whether to redirect employer matches.
- Employers/State Budget:
- No new state expenditures anticipated; administrative costs to be minimized by aligning with existing systems.
- Tax and Compliance:
- Must adhere to IRC 128 and 530A requirements; coordination with IRS and Department of Revenue to ensure compliance and reporting.
Notes
- The bill codifies a new program under Minnesota Statutes, chapter 43A, with related definitions and operational rules.
- As introduced, it sets a framework but would require rulemaking and implementation steps by the Commissioner.
