If you are a New Jersey employer with 25 or more employees, you may have received a notice that you are required to register your business with RetireReady NJ or certify that you are exempt. This program was established by the Legislature to help workers in the state save for retirement. The first required employer responses are due by September 15, 2024. This applies to employers who have been in business for more than 2 years and have 40 or more employees. The next round is due by November 15, 2024 and covers employers with 25-39 employees. Failure to register for the program, if required, will result in a warning in year 1 and a $100 fine in year 2. Fines get serious in years 3 and 4: $250 per employee who is neither enrolled in nor opted out of participation. That goes up to $500 per employee in year 5. While notices with access codes to register have been sent to employers, businesses that meet the criteria that did not receive the notice are still required to register (see https://www.nj.gov/treasury/securechoiceprogram/employers/employer-program-details.shtml).
To assure that all employees have the opportunity to save for retirement, this State-run program was established for workers in the private sector. The program will allow for automatic employee enrollment and funding through payroll deductions. Of course, that can be accomplished only with the cooperation of the employers in the state who are required, if they have 25 or more employees, to either register to participate or certify that they already offer a retirement plan.
There is technically no “cost” to the employer to participate in this program and no employer contributions can be made to the plan. Employees are automatically enrolled at a 3% contribution rate unless they change the rate or opt out. They are not allowed to borrow from their accounts, but their accounts can follow them to a new employer. Most importantly, employers have no fiduciary responsibility for their employees’ accounts in this plan. Also, any employer participating in this program can later offer a private retirement plan and withdraw. Smaller employers, who aren’t required to, are allowed to participate in the plan. The self-employed and employees of a smaller business that doesn’t participate in the plan may also set up an account. The accounts are IRAs and subject to the annual funding limits for IRA accounts.
Participation doesn’t seem to be an egregious effort and the pilot program the State ran was well received. For more information and access to webinars for employers and savers, go to: https://www.nj.gov/treasury/securechoiceprogram/index.shtml.
Article contributed by Lois S. Fried, CPA, CFE, CVA, ABV
