New York State Enacts Mandatory Retirement Plans
Last month, New York joined the ranks of states requiring certain employers to offer a qualified retirement plan or join a state-facilitated retirement savings program. Below are some key features of the New York State Secure Choice Savings Program.
This Secure Choice Savings plan applies to the following for-profit and non-profit employers in New York State if they:
- Had at all times during the previous calendar year at least ten employees in the state.
- Have been in business for at least two years, and
- Do not offer a qualified retirement plan such as a 401(k) or 403(b).
All three of these requirements must be met to require mandatory participation in the program.
There is a provision prohibiting an employer from terminating an employer sponsored retirement plan for purposes of participating in the Secure Choice Savings plan.
A participating employer’s duties under the program are purely administrative.
- Set up a payroll deposit retirement savings arrangement,
- Automatically enroll each employee who does not opt out of the program,
- Withhold and remit employee contributions to the program, and
- Disseminate the state’s employee informational materials.
The legislation became effective immediately, but it calls for enrollment of employees to begin no later than December 31, 2021. Participating employers must setup their payroll deposit arrangements within 9 months of the program opening for enrollment. However, it is currently unclear exactly when employers will have to enter the program as it may be possible that New York State will delay implementation.
The program covers all employees in New York who are at least 18 years and does not distinguish between part-time and full-time employees. However, employees can opt-out of participation in the program at any time.
New York Secure Choice Savings Board is tasked with selecting the investment options in the program. Multiple options will be available, and they will differ in terms of cost and risk profile to appeal to a broad range of savers.
For employees who do not elect a deferral amount, the default election will be 3% of wages. Additionally, the individual retirement accounts created under this program will be Roth which means they will be after- tax contributions. Federal contribution limits for Roth IRAs will apply ($6,000 in 2021 and 2022). Pre-tax contributions are not permitted.
If you would like additional information please contact your Gettry Marcus Advisor.