Program Details

Bill Nos. 888-A and 901-A, commonly referred to together as the “Retirement Security for All” legislation, create a mandatory auto-enrollment payroll deduction IRA program for employees of private sector employers that employ five or more employees and do not currently offer a retirement plan, such as a 401(K), 403(B), or a defined benefit pension plan. While employers are not required to contribute to the plans, the law requires employers to enroll employees who are age 21 or over and work at least 20 hours a week, remit funds deducted from the earnings of each eligible employee for deposit into the program, and distribute information about the program to its employees.

Under this new law, the default employee contribution rate will be 5% but will allow employees to opt out or adjust the rate as they deem fit, up to an annual IRA maximum of $6,000 (or $7,000 for those age 50 or above). The plan will be portable, enabling employees to continue contributing to the plan or roll it over into other retirement savings plans in the event that they change jobs.

Employers will be required to retain annual records documenting their compliance with the program for a period of three years, and the law grants government the power to access such records upon request.

Who Will Oversee the Program?

The law establishes a Retirement Savings Board (Board) to facilitate the implementation of the program. The Board will consist of three Mayoral appointees who will be tasked with determining the start date of the program, entering into contracts with financial service providers and administrators, creating a process for participation, and conducting education and outreach to employers and employees. The Board will work alongside the Comptroller in selecting investment strategies and policies.

The language of the law makes clear that the program will be designed and operated in a manner that will not cause it to constitute an employee benefit under the Employee Retirement Income Security Act of 1974 (ERISA). Further, the program automatically terminates if the City’s Corporation Counsel deems it likely that the law conflicts with or is preempted by ERISA.

When Does it Start?

Although the law will take effect in 90 days, the Board will have up to two years to implement the program.

Potential Employer Penalties

The law states that the Mayor shall designate a government office or agency to enforce the program, and creates a procedure that enables eligible employees to submit complaints of violations of the program to such enforcement office or agency within one year of the date such employee learned “or should have learned” of the alleged violation.

An employer who continuously fails to enroll eligible employees and/or properly remit funds into each individual plan will be subject to an increase in fines for each individual violation. Per the law, employers will be subject to a $250 fine for an initial violation. If an employer violates the law again within two years of the previous violation, that fine doubles to $500, and increases to $1,000 for any subsequent violations within that two year window. Employers who fail to properly retain records will also be subject to a $100 fine for each such violation.

While these amounts seem nominal at first, employers should take note that these fines apply with respect to each eligible employee. Thus, if an employer violates this law across the board and with each individual employee, these fines will swiftly add up to a substantial amount.

For more information on potential penalties, employers should review Section 20-1414 of Bill No. 888-A here and consult with counsel when the Board implements the program.