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New Jersey has joined the handful of states that have created an IRA program featuring automatic enrollment for workers who aren't offered a contributory retirement plan at their workplace.
The New Jersey Secure Choice Savings Program, signed into law by Gov. Phil Murphy late last week, requires that employers with 25 or more employees participate in a retirement savings program through automatic payroll deductions, but employees will have the ability to opt out if they choose.
The program will be managed by the New Jersey Secure Choice Savings Board, which will include the state treasurer, comptroller, and director of the Office Management and Budget, or their respective designees, plus two public representatives — one from a business trade organization and the other representing enrollees. The board will design the program in accordance "with best practices for retirement savings vehicles," according to the legislation.
The program must begin to enroll employees within 24 months of its effective date, which was March 28, when the governor signed the legislation. It sets a default contribution rate of 3% per employee and requires that employers enroll new workers within three months of their hiring date.
"Saving for retirement is paramount for all employees, but too often, those who work for small businesses don't have a simple way to set aside these savings," Murphy said in a statement. "By creating the Secure Choice Savings Program, we are ensuring that every worker in New Jersey will have the opportunity to save for the future. We are creating more opportunities for future retirees and generations of workers to follow."
Employers covered by the legislation who fail to enroll their employees will be subject to a written warning from the department the first year, then fines of $100 for each employee who are not enrolled, which will eventually increase to $500 per employee for the fifth year of noncompliance. Employers who collect employee contributions but fail to remit them to the state board will face penalties of $2,500 for the first offense and $5,000 for subsequent offenses.
