The State of New Jersey is making a state-administered retirement savings program available to eligible workers who do not have qualifying retirement savings plans through their employer. This is an innovative approach to provide access to the benefits of retirement savings plans to workers who do not have the opportunity to participate via their employers, and there is no cost to employers to participate. At the same time, there are also significant compliance requirements for employers with at least 25 employees to enroll in the program and offer the benefit to their workers.
What business entities are covered?
Businesses with at least 25 employees working in New Jersey at any time during the prior calendar year and that have been in business at least two years are covered by this requirement to enroll unless they are exempt because they already offer a qualified plan. The 25-employee threshold broadly encompasses all employees 18 years of age or older who either live in New Jersey or are employed in New Jersey, provided their wages are subject to New Jersey state income tax withholding. The statute does not expressly exclude part-time or occasional employees from this threshold. And for New Jersey businesses using leased employees, staffing companies, or a professional employer organization, those employees also are counted toward the 25-employee threshold.
Employers offering a qualified company-sponsored retirement savings plan are exempt from the requirement. This includes 401(k) plans, qualified annuity plans and more.
Self-employed individuals and/or individuals working for employers who are exempt from the enrollment requirement may contribute directly to the RetireReady NJ program.
What must covered business entities do?
Covered employers, i.e. those with 25 or more employees that have been in business at least two years without offering a qualified plan, must enroll eligible employees who do not opt out in the RetireReady NJ program within three months of their hire date or, for existing employees, within 30 days of the enrollment deadline (see below). Once enrolled, employers must collect employee contributions in accordance with the terms of the plan and employee selection and remit those contributions to the state-administered plan. Importantly, employees must be automatically enrolled for payroll contributions at the default savings rate of 3% of gross pay. Employees can opt out at any time or adjust their savings rate. Because the RetireReady NJ program is a Roth IRA program, the contributions are made post-tax.
What is the deadline for compliance?
The State has announced implementation deadlines as follows:
- September 15, 2024 for employers with 40 or more employees. Should an employer fail to register before June 15, 2025, it may be subject to penalties in accordance with the statute.
- November 15, 2024 for employers with 25-39 employees. Should an employer fail to register before August 15, 2025, it may be subject to penalties in accordance with the statute.
What are my next steps?
Covered businesses should consult with labor and employment counsel and with their benefits provider to assess participation in the plan or rollout of a qualifying retirement savings plan. Employers who are participating should notify employees using the forms provided by New Jersey at https://www.nj.gov/treasury/securechoiceprogram/index.shtml and implement a process to track completion of these forms by employees who are enrolling and those who are opting out of participation.
