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More About Mandatory Retirement Plans and Automatic Enrollment – New York’s Mandatory Program

By November 10, 2021No Comments

The “push” is on in Washington, and in many States, to mandate that employers provide some form of retirement plan for employees.  More than half of New York’s private-sector workforce does not have access to employer-offered savings options, according to AARP New York.

On October 21, 2021, New York State Governor Kathy Hochul signed legislation passed earlier this year by the NY Senate and NY Assembly, which modified New York’s state-run retirement savings program from a voluntary program to a mandatory program.  The NYS retirement savings program, known as the New York State Secure Choice Savings Plan (Secure Choice), was established a few years ago to allow an employer to voluntarily participate so that its employees can make tax-free retirement contributions through payroll deduction with deposits made into IRAs.

Secure Choice now is mandatory for New York State private employers – including non-profit employers – if the employer (1) employed at least 10 employees in NYS at all times during the previous calendar year, (2) has been in business at least two years, and (3) has not offered a qualified retirement plan (e.g., 401(k) plan, profit sharing plan) in the preceding two years.  Employers that currently offer retirement plans are prohibited from terminating those plans for the purposes of participating in Secure Choice.

The law change also requires “automatic enrollment”, i.e., mandatory employee pre-tax payroll deductions, equal to 3 percent of pay, unless the employee affirmatively opts out of the program or voluntarily chooses a contribution percentage that is more or less than 3 percent of pay.  The deduction is contributed to a state-approved IRA for the employee.

We are expecting guidance from the Board that administers Secure Choice regarding implementation, including the automatic enrollment process and how opt-out occurs.  Hopefully, that guidance will come soon:  The new law provides that a covered employer must set-up payroll deposit IRAs for its employees within nine months from the date that the Board opens Secure Choice for enrollment.

To learn more, including proposed Federal laws regarding mandatory plans and automatic enrollment, contact mbrand@acsi-ny.com or check-out www.acsi-ny.com.

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