Several years ago, New York State enacted a law to make the New York State Secure Choice Savings Plan (“Secure Choice”) mandatory for New York State private employers, including non-profit employers. The 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. The Secure Choice Board has been working to have the mandate “go live” and it is expected sometime in 2024.
The Secure Choice mandate applies to an employer that:
- employed at least 10 employees in NYS at all times during the previous calendar year;
- has been in business at least two years; and
- has not offered a retirement plan (e.g., 401k Plan, SIMPLE IRA Plan) in the preceding two years.
Employers who are covered by the mandate must provide Secure Choice information and documentation to employees, must process employee enrollment elections, must implement payroll deductions on a ROTH after-tax basis, and must automatically enroll employees who do not make an enrollment election. The “automatic enrollment”, i.e., mandatory employee ROTH after-tax payroll deductions, must be 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 employer is then responsible for remitting payroll deductions to a state-approved ROTH IRA for the employee. We assume guidance will be issued regarding the process for remitting deposits and to what degree the employer will be responsible for ensuring participant compliance with IRS rules and regulations. Similar to other state-mandated IRAs, we do know that the employer will be prohibited from making any employer contributions to the IRA, such as a match.
In September, NYS selected the Secure Choice vendor, Vestwell, and announced four limited investment options that participants will have to choose from.
Now is the time to determine whether the retirement plan mandate will apply to you or your clients, and whether to consider other options for a start-up retirement Plan…one that allows you to choose the Plan terms and conditions, provides for significantly greater contribution limits and the ability to make employer contributions, offers a much more robust investment menu, and the flexibility to work with the service providers that you prefer.