Certain New Jersey employers will be required to provide a retirement plan for their employees beginning next month. On March 28, 2019, Governor Murphy signed legislation passing the New Jersey Small Business Retirement Marketplace Act that requires employers to automatically enroll their employees in the New Jersey Secure Choice Savings Program (“Secure Choice Savings Program” or “the Program”) if they do not already offer their employees a 401(k) or another qualified retirement plan. The Secure Choice Savings Program requires employers to establish a payroll-funded IRA savings plan for employees who are enrolled in the Program. Employee enrollment in the Secure Choice Savings Program is to begin on March 28, 2021, and employers must enroll their employees in the Program by the end of 2021.
Employers must participate in the Secure Choice Savings Program if they meet the following criteria:
- Are a profit or non-profit employer;
- Have employed 25 or more workers during the past calendar year;
- Have been in business for at least two years;
- Do not offer their employees the ability to participate in a qualified retirement plan such as a 401(k) or 403(b) plan.
Governmental employers are not required to establish a Secure Choice Savings Program. Employers also do not have to offer the Program to independent contractors (1099 employees) who do work for them.
How does the New Jersey Secure Choice Program Work?
All W-2 employees are eligible to participate. This includes part-time employees. Unless employees proactively opt-out, they will be automatically enrolled and contribute 3% of pre-tax income into the Secure Choice Savings Program through a payroll deduction. The annual contribution maximum is $6,000 for those under 50 years old, and $7,000 for those 50 or older. The Program does not allow for employer contributions.
What Actions Does an Employer Need to Take to Comply with the New Jersey Secure Choice Savings Program Mandate?
Employers must provide information about the Program to their employees. This includes providing enrollment packets to all new employees within 30 days of hire. Employers must track the eligibility status of their employees, and whether each employee has opted-in or opted-out. For any employees who do not opt-out within 30 days of notification and are eligible for the Secure Choice Savings Program, the employer must set up a 3% payroll deduction and deposit the deductions. Employers must hold an open enrollment period for the Program every two years. They must also auto-enroll any employee who has not participated for at least one year and track those employees. Employers must submit an employee census to New Jersey Secure Choice Savings annually.
Penalties for Employer Non-Compliance
Employers may incur a penalty if they do not comply with the Program. In the first calendar year, if the employer does not comply with the Program, the employer will receive a written warning from the State of New Jersey. If an employer does not comply with the Program for a second year, the employer may be fined $100 for each employee who is not enrolled in the plan and has not opted-out. If an employer does not comply with the Program for a third and fourth year, the employer will be fined $250 for each employee who is not enrolled and has not opted-out. If an employer still does not comply with the Program by the fifth year or any subsequent year, the employer may be subject to a $500 per employee fine for each employee who is not enrolled in the Program, but has not opted- out of the Program. Employers that collect employee contributions, but do not deposit the contributions to the Program will be subject to a penalty of $2500 for the first offense, and $5000 for each subsequent offense.
TAKEAWAY: Employers must offer retirement programs for their employees ASAP.
If you are an employer and need help navigating the New Jersey Small Business Retirement Marketplace Act/New Jersey Secure Choice Savings Program or any other employment laws, contact Stephanie Gironda or any member of the Wilentz Employment Law Team.
Tags: New Jersey Secure Choice Savings Program • New Jersey Small Business Retirement Marketplace Act • Governor Phil Murphy
The postings on this blog were created for general informational purposes only and do not constitute legal advice or a solicitation to provide legal services. Although we attempt to ensure that the postings are complete, accurate, and current as of the time of publication, we assume no responsibility for their completeness, accuracy, or timeliness. The information in this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel.
This blog may contain links to independent third party websites and services, including social media. We provide these links for your convenience, and you access them at your own risk. We have no control over and do not monitor the content or policies (including privacy policies) of these third-party websites and have no responsibility for, and no liability with respect to, their content, accuracy, or reliability. Unless expressly stated, we do not endorse any of the linked websites or any product, service, or publication referenced herein or therein. We will remove a link to any site from this blog upon request of the linked entity.
We grant permission to readers to link to this blog so long as this blog is not misrepresented. This site is not sponsored or associated with any other site unless so identified.
If you wish for Wilentz, Goldman & Spitzer, P.A., to consider representing you, please obtain contact information from the Contact Us area of this blog or go to the firm’s website at www.wilentz.com. One of our lawyers will be happy to discuss the possibility of representation with you. However, the authors of Wilentz blogs are licensed only in New Jersey and/or New York and do not wish to represent anyone who viewed this site in a state where the site fails to comply with all laws and ethical rules of that state.