What Employers Need to Know About the New Jersey Secure Choice Savings Program Act

What is it?

The New Jersey Secure Choice Savings Program Act, also referred to as the New Jersey Small Business Retirement Marketplace Act and as the NJ Auto-IRA Act (the “Act), establishes a state-sponsored retirement savings program and requires certain employers that do not offer a traditional retirement savings option to its employees to either start doing so or participate in the State-sponsored program.

What Does the Act Require?

Covered employers are required to enroll in the State-sponsored program or offer employees the ability to participate in a qualified retirement plan as defined by the Act.

Employers that choose to enroll in the State-sponsored program must provide information about the Program to their employees and distribute enrollment packets to all new employees within 30 days of hire.  Employers must keep track of 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 and must submit an employee census to New Jersey Secure Choice Savings annually.

All of the contributions to the program come from employees; there is no requirement that employers make any contributions or “match” what is contributed by the employee.

Employers “retain the option at all times to set up or provide coverage under any type of employer-sponsored retirement plan.”

Employers with fewer than 25 employees may arrange for their employees to participate in the State-sponsored program but are not required to do so.

Does the Act Apply to All Employers?

The Act applies to all profit and non-profit employers that meet the following criteria:

(1) they have employed 25 or more workers during the previous calendar year;

(2) they have been in business for 2 or more years; and

(3) they have not offered a “qualified retirement plan,” such as a 401(k) or 403(b) plan, to their employees.

Does the Act Apply to All Employees?

The Act applies to both full-time and part-time W-2 employees of all covered employers.

When Does the Act Take Effect?

The Secure Choice Savings Board (the “Board”) is in the process of implementing the program, but it is expected to meet the March 28, 2022 deadline.  Once the Board notifies the State Treasury that it has implemented the program, employers will be given 9 months to comply with the Act’s requirements.

Further, after the initial implementation, at least once every year, “participating employers shall designate an open enrollment period during which employees who previously opted out of the program may enroll in the program.”  Notably,

Overall, participating in the State-sponsored program imposes no financial costs to employers, but does impose various administrative burdens.

What are the Penalties for Failing to Comply with the Act?

Unless an alternative qualified retirement plan has been offered to employees in accordance with the Act, any covered employer who fails to enroll any employee who has not opted out of participation in the State-sponsored program may be subject to the following penalties:

• For the first calendar year during which at any point a violation occurs, a written warning by the department;
• For the second calendar year during which at any point a violation occurs, a fine of $100 for each employee who was neither enrolled in the plan nor opted out;
• For the third and fourth calendar year during which at any point a violation occurs, a fine of $250 for each employee who was neither enrolled in the plan nor opted out;
• For the fifth and any subsequent calendar year during which at any point a violation occurs, a fine of $500 for each employee who was neither enrolled in the plan nor opted out; and

• 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.

What Should You Do Now?

Employers should begin to consider whether they will choose to participate in the State-sponsored program or offer another qualified retirement plan and start drafting communications to be sent to employees regarding whichever plan is chosen.

If you have any questions about the New Jersey Secure Choice Savings Program Act and how it affects your company, contact employment attorney Carol Harding.