New Jersey Legislation Establishes State-Run Retirement Savings Plan

Apr 15, 2019
| David Pearson
New Jersey Retirement Savings Program

Over the last year, New Jersey has been at the forefront of enacting legislation aimed at helping and assisting workers. State officials have expanded paid family leave, set minimum wage to hit $15 in the coming years, addressed the gender pay gap, and mandated paid sick time just to name a few.

But Governor Phil Murphy and state lawmakers are not done drafting new employment-related legislation.

In late March, the governor signed a bill into law that will once again help employees in New Jersey, this time with retirement savings – especially for small business staff.

New Jersey Secure Choice Retirement Plan

On March 28th, New Jersey Governor Phil Murphy signed a bill into law that created the New Jersey Secure Choice Program, a state-run retirement plan for private-sector employees who aren’t offered one by their employer.

The fund will be managed by the New Jersey Secure Choice Savings Board, which includes the State Treasurer, Comptroller, Director of Office Management and Budget, and others.

The law requires New Jersey employers who have 25 or more employees to participate in the program through automatic payroll deductions that go into a state-administered Individual Retirement Account (IRA).

Employers with less than 25 employees, while not required, may participate in the program if they choose.

Employees of companies that are either required to or that choose to voluntarily participate in the program will automatically have 3% of their wages deducted and contributed into an IRA. However, workers can choose to either opt-out of the program or change the percentage that is deducted.

Does the Law Address Companies Who Partner with a PEO?

The law, A4134, does include language specific to professional employer organizations (PEO) and the relationship that exists between a PEO and their clients (co-employment) – making New Jersey the first state to do so.

The law treats a retirement plan sponsored by a PEO the same as if the plan is offered by the client. This means that small businesses who offer a 401(k) or other retirement plan to their workforce through a PEO relationship do not have to worry as they will be compliant with the new law.

Additionally, under the law individuals who are co-employed through a PEO will be treated as employed by the client company and not the professional employer organization.

For New Jersey employers this is another advantage to exploring a PEO solution for employee benefits and retirement plan needs, in addition to other areas of HR.

What Should New Jersey Employers Know?

Besides which employers need to participate in the program, there are a few other details businesses should know.

First, employers will not be required to provide a match or additional funds.

Second, the bill states that the program must begin with employee enrollment within 24 months of the effective date – March 28th, 2019. So, it will be a while before employers and employees will see an impact from the program and legislation. Expect to see more information and guidelines about the law in the coming months.

However, employers who will be required to participate should start planning accordingly as soon as possible. Working with compliance experts or researching PEO outsourcing solutions could help employers avoid potential fines and penalties that come from failing to properly enroll.

Are More Employment Law Changes on the Horizon in New Jersey?

Employers and business owners in New Jersey should keep up with the latest news from state officials, as it is likely that even more legislation could come throughout the year.

Making sure that compliance is maintained with all state, federal, and local employment laws is a must for all employers. Business owners shouldn’t hesitate to reach out for assistance should they be unsure how to proceed with any change in legislation.

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