On October 21, 2021, New York State Governor Hochul signed legislation (S.5395A/A.3213A) requiring employees to be automatically signed up for the New York State Secure Choice Savings Program—also referred to as the Auto-IRA law.
What is the purpose of the S.5359A law?
The purpose of this bill is to create a self-sufficient retirement savings program in the form of an automatic enrollment payroll deduction IRA for private-sector employees.
What are the provisions of the S.5359A law?
Section 1 of the law makes company enrollment into the New York state secure choice savings program automatic.
Section 2 of the law would allow employees to opt out of the secure choice savings program.
Section 3 of the law requires employee informational materials to include an explanation of how employees can opt out of the program after being enrolled and a form for an employee to note his or her decision to opt out.
Section 4 of the law provides that an employer is not liable for an employee's decision to opt-out of the program.
Section 5 of the law requires participating employers to have payroll deposit savings arrangements to allow each employee to participate in the program, and to automatically enroll employees who have not opted out of the program.
In addition, deductions of program contributions shall not begin until the 30th day after enrollment. Employers cannot terminate current qualified retirement programs to participate in NYS secure choice program.
Section 6 of the law defines an employer as a person or entity that had ten or more W2s during the previous calendar year, has been in business for at least two years, and has not offered a qualified retirement plan in the preceding two years.
Who does the new law apply to?
As stated above in Section 6, this law applies to employers who have:
- At least ten or more W2s during the previous calendar year
- Been in operation for at least two years
- Don’t currently offer a workplace retirement plan
Can employees opt out if they don’t want to participate?
Yes, this is in Section 2 of the law.
When does the New York State Secure Choice Savings Program law go into effect?
This law is expected to go into effect in 2022. 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.
Do other states have similar mandatory retirement savings laws?
Yes, California, Illinois, Oregon, New Jersey, Maryland, Virginia, Massachusetts, and other states have enacted their own mandatory retirement savings laws. According to AARP, New York State’s law is modeled after similar laws in other states.
Do NY companies with less than ten W2 employees in the previous calendar year have to offer the Choice Secure retirement plan?
Maybe. New York State law mandates that businesses with five or more employees must offer a retirement plan—as long as they offer a retirement plan. It doesn’t have to be the Choice Secure plan.
If your company had nine W2s in the previous calendar year, and you employ six people, then you don’t have to offer the Choice Secure plan. However, you do have to offer another retirement plan. The reason for this is that you have five or more employees. In this example, your W2s are greater than your number of employees due to employee turnover.
How many New York employees will the new Choice Secure law affect?
Approximately 2.5 million private-sector employees are affected.
What NY State agency oversees the new Choice Secure law?
The New York Department of Taxation and Finance will oversee the development and implementation of this program.
As with many new laws, the New York State Secure Choice Retirement Savings Program imposes new responsibilities and costs upon your business. Staying on top of all the new laws can drain time and energy from your company. Worse, yet, if you make any mistakes or fail to comply with all the provisions of this Choice Secure / Auto-IRA law, you can wind up facing penalties.
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