If you are a private employer in New York State you may soon be required to offer your employees a state-mandated retirement plan.
On October 21, 2021, New York State signed into law legislation S.5395-A/A.3213-A requiring private sector employers who do not offer employees a qualified retirement plan to automatically enroll employees in the New York State Secure Choice Savings Plan. This mandate requires all employers who have been in business for at least 2 years and have a minimum of 10 in-state employees to automatically enroll employees in the program unless they opt out of participation.
This is an Auto-IRA program that is government-run and deducts a portion of employee’s paychecks into an Individual Retirement Account or IRA
Key Details of the NYS Retirement Plan Mandate
Participation in the New York State Secure Choice Savings Program is mandatory for all employers that:
- had at least 10 NYS employees during the entire prior calendar year
- have been in business for at least two years
- have not offered a qualified retirement plan, such as a 401(k) plan, during the prior two years.
Participating employers must:
- automatically enroll their NYS employees in the program unless an employee has opted out
- withhold and transfer after-tax employee contributions to the program
- provide informational materials to new employees at the time of hire and annually in advance of a program enrollment period (for employees who have opted out)
- set up a payroll withholding/transfer arrangement no later than nine months after the program opens for enrollment (date not specified in the legislation).
Employees will be automatically enrolled to make a 3% payroll deduction but will have the option to change their contribution amount or elect not to participate. Contributions under the program will be held in a Roth individual retirement account (IRA) and will be subject to the annual contribution limit that applies to IRAs ($6,000 in 2022).
Implications for Employers
The date that covered employers will need to establish the contribution arrangement is not clear. Although the legislation is effective immediately, the arrangement would not need to be established for up to nine months after enrollment is opened by the board that administers the program; however, it is not yet known when the board will open enrollment. Affected employers should begin to consider whether they will be subject to the NYS program, and if so, how they would comply with the new requirements
Once established, the responsibilities of employers include:
- Creating a payroll deposit retirement savings system
- Automatically enrolling employees who do not opt out of the program
- Withholding and remitting employee contributions to the program
- Disseminating the state’s employee informational materials.
It’s also unclear how the NYS program will interact with a similar mandate established by New York City (NYC) earlier in 2021. While the NYC legislation calls for its program to be discontinued in the event the state establishes a mandatory program that covers “a substantial portion of employers” who would be covered by the NYC law, the NYC requirement applies to employers with five or more employees (while the NYS law applies to employers with 10 or more employees). Presumably this will be clarified by future guidance.
Is this plan the best option for Your Company?
Because it’s a state mandate, your company will have to offer a retirement plan if you have 10 or more employees. We all can agree that saving for retirement is the right thing to do. But you have options, and with a little planning and insight, you can offer a plan that offers benefits for your employees, your company, and you.
Hazard & Siegel has built business retirement plans for over 55 years. There are better options than just managing a state-mandated IRA program for your employees. We have developed successful future planning that considers the employer and employee to provide flexibility and options that build a brighter future for everyone.
Hazard & Siegel offers comprehensive financial planning and retirement solutions that are customized to your unique needs. We manage your plans to ensure compliance with NYS and Federal regulations and remove the complexity and risk of managing the retirement program for you and your employees. Learn more about the NYS retirement mandate, and what your options are by calling 315-414-0722.