New York has enacted legislation requiring certain private-sector employers that do not sponsor their own retirement plans to automatically enroll their employees in New York State's Secure Choice Savings Program. The state-run Program is designed to assist the retirement savings efforts of New York private-sector employees.
The Program is intended to be a self-sufficient retirement savings program in the form of a Roth individual retirement account (IRA). Its development and implementation will be overseen by the New York State Department of Taxation and Finance. However, enrollment in the Program is not yet open and implementation is not expected until 2022.
Legislation establishing the Program was enacted in 2018, but participation was voluntary for employers. The recent legislation now requires covered employers to automatically enroll their employees in the Program and to facilitate participation for their employees (as explained below) on an ongoing basis once the Program is up and running.
Covered employers are those who:
- 1. Do not sponsor their own retirement plan (such as a 401(k) or 403(b) plan), and have not done so for the past two years;
- 2. Have at least 10 employees in the state; and
- 3. Have been in business for at least two years.
How the Program Works
Covered employers must automatically enroll their eligible employees, i.e., employees age 18 and over and earning wages in New York, once enrollment opens. After enrollment, employers are responsible for collecting and timely remitting their employees' payroll deductions into the Program.
Employers must have payroll deposit arrangements in place to allow each employee to participate in the Program within nine months after the Program is open for enrollment. Deductions of Program contributions will not begin until 30 days after enrollment. An employer is not liable for any expenses associated with administration, fiduciary liability, or investment losses. Notably, employers cannot terminate current qualified retirement programs in order to participate in the Program.
The law requires employers to provide informational materials to existing employees at least one month prior to facilitation of access to the Program and to new employees at the time of hiring. Employee informational materials must include a disclosure form and a form for new and existing employees to note their decision to opt out of program participation (as explained below). The state is expected to prepare these materials for distribution by covered employers to their employees.
An employee's contribution percentage is set at 3 percent, but can be changed by the employee, subject to contribution limits for Roth IRAs and other program rules. An employer cannot make contributions to supplement or match employee contributions. Thus, an employer's role is limited to deducting contributions and remitting them to the Program.
Automatically Enrolled Employees May Opt Out
Automatically enrolled employees are permitted to opt out at any time. An employer is not liable for an employee's decision to opt out of the Program. At least annually, the Program will designate an open enrollment period during which employees who previously opted out of the program may enroll in the Program.
Separate New York City Program
In May 2021, New York City passed legislation to create its own retirement savings program, the Savings Access New York Retirement Program, also in the form of a Roth IRA. The Savings Access Program is mandatory for employers with employees working in the city, but has not yet been implemented.
At the time the city enacted the Savings Access Program, the state's Program applied only on a voluntary basis to employers. In light of the change to a mandatory Program, we expect that the city may discontinue the Savings Access Program, especially if the state's Program is applicable to a majority of city employers who would otherwise have had to comply with the requirements of the Savings Access Program.
We will continue providing updates regarding the Program when they are available.