New Jersey Secure Choice Savings Program Act
If you are a business owner with 25 or more employees, you are now faced with an obligation that was previously a personal business decision; but you don’t have to settle for the “no-choice choice” …
…YOU HAVE OPTIONS. Read on to learn more
An alternative to the mandatory, state-run program is to voluntarily implement a 401(k) plan. The question employers should consider: What is the difference?
Some Plan Feature Differences: The Act (state mandated option) vs. Company-Sponsored 401(k) Plan (elective choice)
Let’s assume you are an affected company and currently do not offer a retirement plan. Employers must now consider whether they want to implement a 401(k) plan or be defaulted into NJ’s state-mandated program. A company-sponsored 401(k) plan provides for flexibility and customization not available through the state-mandated program. Below is a table highlighting six significant differences between the two:
Some Facts about the Act2:
- Signed into law by Governor Phil Murphy in March of 2019.
- Implementation is slated for March 28, 2021 (could be delayed up to one year).
- A Board will be established to oversee the program.
- The Act is an auto-IRA program, not a 401(k) Plan.
- Employers will be required to:
- Provide employees with information about the program within 30 days of employment.
- Deposit employee salary withholdings on a timely basis.
- Offer an open enrollment period annually.
- Track whether an employee has opted-in or opted-out.
- Submit employee census data to the NJ Secure Choice Savings Program annually.
- Employees age 18 that have completed 3 months of service must be auto-enrolled at a mandatory 3% of pre-tax salary.
- Employees can increase or decrease the amount deferred into the program OR opt out of participating.
- Employers can incur penalties for non-compliance ranging from a written warning up to $5,000.
- New Jersey business owners must offer a retirement plan if they have been in business for 2 or more years, have 25 or more employees and have not offered a qualified retirement plan in the past two years.
I am a fan of the Act, in spirit. Why? Because I am a proponent of all employees having access to a company-sponsored 401(k) plan that is of high-quality, low-cost and a fiduciary based / client first solution. However, I am not a fan of “forced-choice” and thus prefer the ability to customize a retirement plan program based on the specific needs and characteristics of the business owners and employees I serve.
If you are an employer with 25 or more employees and have yet to implement a 401(k) plan let’s discuss the many options available to you, before that choice is made for you.
Michael Abate, AIF®, CRPS®
Corporate Retirement Plan Specialist