New York Secure Choice Savings Key Takeaways:
In October 2021, New York Governor Kathy Hochul signed legislation into law that requires businesses with 10+ employees to provide retirement options.
Private sector employers without a current plan must automatically enroll employees in New York State's Secure Choice Savings Plan.
However, businesses have options to comply, including 401(k) and 403(b) plans, which offer higher contribution limits and flexible plan design.
In New York, about 4.3 million private-sector employees do not have access to 401(k) plans, pensions, or other retirement savings options. To address this retirement savings gap, the state government of New York is hoping to bolster retirement savings options by establishing retirement programs for employers that do not currently offer a plan.
In October 2021, New York Governor Kathy Hochul signed legislation into law that requires most employers with 10 or more employees to provide retirement options for workers. Senate Bill S5395A requires private sector employers without a current retirement plan to automatically enroll their employees in New York State's Secure Choice Savings Plan.
2022 Updates: As of early 2022, implementation of the program appears to be moving forward, but final details—including any deadlines—are to be determined. For now, New York businesses affected by the upcoming mandate should track when enrollment opens (we're here to help).
What is the New York State Secure Choice Savings Program
Originally enacted in 2018, the Secure Choice Savings plan is an automatic enrollment payroll deduction IRA retirement savings program. New York’s $168 billion fiscal budget for 2019 added a provision for this new, voluntary option to help more New Yorkers save for retirement using a Roth IRA. The program is managed by the New York State Secure Choice Savings Board, while the Department of Taxation and Finance oversees its development and implementation.
Passed by the New York General Assembly in May 2021, and the New York State Senate in June 2021, Senate Bill S5395A was signed into law on October 21, 2021. To comply, employers must have a payroll deposit retirement savings arrangement no later than nine months after the New York State Secure Choice Savings board opens the program for enrollment.
What employers should know about the New York Secure Choice Savings Program
Is New York Secure Choice mandatory?
Yes. Private-sector companies with at least 10 employees that have been in business for at least two years and have not offered employees a qualified retirement plan such as a 401(k) or 403(b) are required to provide an auto-enroll IRA program.
What are the deadlines for businesses?
Employers must have a payroll deposit retirement savings arrangement no later than nine months after the New York State Secure Choice Savings board opens the program for enrollment. And while legislation became effective immediately after being signed into law, specifics about future deadlines are still uncertain as of early 2022.
It was originally suggested that employers would be required to enroll in NY Secure Choice by December 31, 2021—but did not provide further insight on how to do so. However, on January 26, 2022, the New York State Secure Choice Savings Board held its first meeting to lay some foundations for the program. As this suggests, implementation of the program is seemingly moving forward as of early 2022.
Stay tuned for more details on when the program will open for enrollment
What if my company already offers a retirement savings program?
If your small business already offers a 401(k), 403(b), or pension plan, you are not required to use the New York Secure Choice Savings Program. Businesses retain the option to choose retirement programs of their choice for employees.
Are employees automatically enrolled or can they opt out?
When businesses choose to participate in the plan, employees are automatically enrolled, unless they designate that they will opt out. Following initial implementation of the program, employers must provide an open enrollment period at least once every year. During this time, employees who previously opted out can enroll again in the program.
Employees are initially enrolled at a contribution rate of 3% of their wages, and payroll deductions will begin following the 30th day an employee has been enrolled in the program. However, employees may voluntarily elect to change their contribution levels. Savings are portable and can be transferred if an employee takes a position with another company.
How much does the plan cost employers?
The only costs employers will face are administrative set-up fees, making this an affordable option for businesses and employees, compared to plans offered by some traditional retirement plan providers. Secure Choice legislation includes a one-time investment of $4 million to cover administrative costs, which is expected to be recouped by the program within a few years.
Employers are not required to contribute. This means that small business owners won’t—and can’t—match employee contributions. If you’re interested in providing an employer match to your employees, you will need to consider offering a 401(k) plan.
How much can employees save with an IRA?
The new plan simplifies the savings process via a payroll deduction. Employees can save up to the annual Roth IRA limits, which are $6,000 for those under 50 and $7,000 for workers 50 and older in 2021. Roth IRAs allow retirement savings to grow tax-free and withdrawals made after retirement are generally not taxed (since contributions are taxed on the way in).
What are Next Steps?
The good news is that there are no immediate next steps if you are a New York State employer except to stay updated on when enrollment opens. Right now, enrollment is set to begin sometime in 2022, but an exact date is yet to be determined.
Once you receive notice that enrollment is open for all qualified employers, you will have 9 months to comply with the requirements listed above.
Employers who qualify under these conditions have administrative responsibilities to ensure the Secure Choice Savings Program is enacted. According to the law, employers that qualify must:
Create payroll deductions in the chosen amount or the default 3% of employee wages
Enroll each employee in the program that does not choose to opt out
Provide necessary forms to current employees and all future employees to opt out of the program
Withhold and remit employee contributions to the program
Provide all informational materials to employees regarding the program and their options
While employers do have responsibilities when it comes to enrolling, withholding and remitting, employers are not fiduciaries under this program. That means they are not liable when it comes to benefits paid and investment returns for participants.
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