The New Jersey Secure Choice Savings Program Act, a measure that would create an automatic enrollment payroll deduction IRA in the Garden State, is before the state Assembly and the state Senate. It is intended to promote “greater retirement savings for private sector employees in a convenient, low-cost, and portable manner.”
Assemblyman Roy Freiman (D-Hillsborough) introduced the Assembly version, A. 4134; Sens. Sen. Joseph Lagana (D-Paramus) and Troy Singleton (D-Moorestown) introduced the Senate version, S. 2891.
The legislation provides that every employer with 25 or more employees shall establish a payroll deposit retirement savings arrangement to allow each employee to participate in the program not more than nine months after the board opens the program for enrollment. Employers would automatically enroll employees; however, employees would be able to opt out. Employers would also provide payroll deposit retirement savings arrangements for their employees and, on behalf of the employees, deposit these funds into the program.
The program would not be mandatory for small employers, which for purposes of the program are defined as those with 25 or fewer employees; participation in the program would be voluntary for them. Employers with 25 or more employees at all times may offer any type of employer-sponsored retirement plan, such as any of the following, instead of setting up a payroll deposit retirement savings arrangement to allow employees to participate in the program:
- DB plan
- 401(k) plan
- Simplified Employee Pension (SEP) plan
- Savings Incentive Match Plan for Employees (SIMPLE) plan
- automatic enrollment payroll deduction IRA
The legislation provides that after the program’s initial implementation phase, at least once every year, participating employers would be required to designate an open enrollment period during which employees who previously opted out may enroll in the program.
Under the program, enrollees would be able to decide how much they want to contribute. They would be able to set their contribution levels based on a percentage of wages or as a dollar amount up to the deductible amount for the enrollee’s taxable year under Code Section 219(b)(1)(A) ($5,500 in 2018). Enrollees who do not select a contribution level would contribute 3% of their wages as long as the contributions do not cause the enrollee’s total contributions to IRAs for the year to exceed the deductible amount for the enrollee’s taxable year under Section 219(b)(1)(A).
Enrollees would be able to select an investment option from those the program would permit; the funds of those who do not make an investment selection would be placed in the investment option selected by the board as the default.
The legislation provides that the program would be administered by a New Jersey Secure Choice Savings Board, whose members would be:
- the State Treasurer or his or her designee, who shall serve as chair;
- the State Comptroller or his or her designee;
- the Director of the Office of Management and Budget or his or her designee;
- two representatives of the public who have expertise in retirement savings plan administration or investment, one to be appointed by the Speaker of the General Assembly and the other by the Senate President;
- a representative of participating employers, appointed by the Governor; and
- a representative of enrollees, appointed by the Governor.
The legislation is before the Assembly Labor Committee and the Assembly Financial Institutions and Insurance Committee.