Gov. Phil Murphy signed the New Jersey Secure Choice Savings Program Act during a ceremony at the Saddle Brook Seniors Center in Bergen County. He said the new law would help provide a more secure future for some 1.7 million private sector workers in the state who aren’t currently offered retirement plans. That amounts to about half of the state’s private sector workforce.
New Jersey workers who currently aren’t offered pensions, 401(k)s or other retirement savings plans through their jobs will get the chance to save with state-administered retirement accounts under legislation signed into law Thursday.
Gov. Phil Murphy signed the New Jersey Secure Choice Savings Program Act during a ceremony in Bergen County. He said it would help provide a more secure future for some 1.7 million private sector workers who aren’t currently offered retirement plans. That amounts to about half of the state’s private sector workforce.
“Today New Jersey took a bold step toward building the retirement security of millions of residents,” Murphy said.
Co-sponsored by state Sens. Joseph Lagana, D-38th of Paramus, and Troy Singleton, D-7th of Delran, the new law creates a state program that would establish individual retirement accounts, as well as a state board to implement and oversee the program.
Most employers would be required to automatically enroll their employees into the program at a 3-percent paycheck deduction, but employees would have the option to opt out or choose a different contribution amount.
Also, companies with fewer than 25 employees would be eligible to participate in the program but would not be required to join.
The new law takes effect immediately, but the new board has two years to establish the program and begin enrolling employees, with the ability to extend the deadline if required.
Once implemented, participating employees will be charged an undetermined administrative fee to cover program expenses.
Murphy said the state would incur some start-up costs, but that the long-term benefits justify the expense of helping New Jerseyans save for a secure retirement rather than face the prospect of poverty in their senior years.
His predecessor, Republican Chris Christie, cited those costs when he conditionally vetoed the legislation in 2016. He also said the measure would be burdensome on businesses because it requires them to enroll their employees in the automatic payroll deduction.
Murphy called the idea that the new law and others, such as the state’s new paid sick leave and expanded family leave requirements, could hurt business “complete, utter rubbish.” He said they would improve worker morale and productivity and make the state a more attractive place for businesses.
He said the state as a whole would also benefit from helping its residents save for retirement.
“We all know how this works. After paying the bills, the rent or the mortgage, buying gas, putting a few extra bucks into a child’s education or a rainy day fund, too often writing an extra check into an IRA just doesn’t happen. For many others, the only retirement plan they have been paying into is Social Security,” Murphy said, citing a recent U.S. Government Accountability Office report that found some 48 percent of Americans 55 and over have nothing saved for retirement.
“We’re facing a retirement crisis,” the governor added. “The fact is more and more New Jerseyans are facing the prospect of retirement without adequate savings to ensure dignity throughout their retirement.”
Evelyn Liebman, AARP-NJ’s director of advocacy, echoed that sentiment in her remarks, noting that the average household only has about $2,500 saved for retirement and that the lack of retirement security disproportionately impacts women and minorities.
Fewer than 5 percent of workers without employer-offered retirement plans choose to enroll in one on their own, but 71 percent of those who are automatically enrolled in a plan choose not to opt out, she said.
Several other states have created similar programs, according to AARP.
“Today we are taking a monumental step to help workers in the Garden State ensure a more secure financial future,” Liebman said.
Singleton was unable to attend the bill signing ceremony Thursday, but he said he was proud to be a co-sponsor of the new law.
“Retirement savings should be accessible, regardless of the industry you work in or the wages you earn,” the senator said. “Individuals should not have to work their entire lives only to live in poverty when they retire. Today’s bill signing marks our commitment to making this notion reality.”
Assemblywoman Carol Murphy, D-7th of Delran, was another co-sponsor. She said the law would provide an easy and proactive route to savings for workers.
“Saving through a payroll deduction IRA allows workers to take proactive steps in securing their financial well-being for the future,” she said.