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New Jersey Secure Choice: Everything Small Businesses Need to Know

New Jersey Secure Choice: Everything Small Businesses Need to Know

Last Updated: July 20, 2023

The Garden State is sowing the seeds of a more prosperous New Jersey.

In 2019, governor Phil Murphy signed into law the New Jersey Secure Choice Savings Program Act, authorizing the creation of a state-sponsored retirement plan to help more private sector employees save for their golden years. With over 1.7 million private sector workers lacking access to a retirement program in the state, the Secure Choice Program represents a massive step toward closing the savings gap present today.

Though the program is not yet operational, businesses in the state should be aware of the upcoming changes that may soon affect them. In this article, we’ll answer some questions you may have about New Jersey Secure Choice and explain how the program will impact New Jersey businesses.

What is New Jersey Secure Choice?

Now in the early stages of implementation, New Jersey Secure Choice will be a new way for employees in the state to save for their retirement.

The program is overseen by a state Board but administered by private-sector partners. New Jersey Secure Choice is an automatic enrollment payroll deduction IRA, meaning participating employees will have contributions automatically deducted from each paycheck and put into a tax-advantaged retirement account.

When they reach retirement, defined by the IRS as after age 59½, workers can use the savings in their account to help pay for their cost of living and supplement their Social Security income.

The program's goal is to make saving for retirement more manageable and accessible for all New Jersey residents.

How Does New Jersey Secure Choice Work?

As an automatic enrollment IRA program, employee contributions are automatically deducted from each paycheck before taxes are taken out. The program is completely voluntary, so employees are not required to participate if they don't want to and can opt-out at any time.

If an employee doesn't choose their own rate, they will be opted into the default savings rate for Secure Choice: 3% of their gross pay.

Which Businesses Are Affected?

Both for-profit and non-profit New Jersey employers are required to participate in the program if they meet the following criteria:

  • Employed at least 25 workers during the previous calendar year
  • Has been in business for at least 2 years
  • Does not currently offer a qualified, employer-sponsored retirement plan to their employees

Also of note: Employees who are co-employed by an employee leasing company and a client company will be treated as employed by the client company—and not the employee leasing company—for the purposes of New Jersey Secure Choice.

Registration Deadline

Once the Secure Choice Savings Program is operational, private sector employers covered by the Act are required to comply with its provisions. However, this requirement does not go into effect until nine months after the Secure Choice Board notifies the Treasury that the program has been implemented.

At this time, the program is not yet operational.

Penalties

Eligible employers that don’t offer a plan within 1 year will receive a written warning from the government. Each subsequent year of non-compliance will result in the following penalties:

  • 2nd year: $100 per employee
  • 3rd and 4th years: $250 per employee
  • 5th year and beyond: $500 per employee

Who Is Eligible to Participate in the Program?

Any resident of New Jersey who is 18 years or older and is employed is eligible to participate in New Jersey Secure Choice. Both full-time and part-time employees must be offered the ability to participate in their applicable retirement savings plan.

Additionally, at least once every year, covered employers must designate an open enrollment period where employees who previously opted out of the program are given the choice to enroll.

Conclusion

The New Jersey Secure Choice program represents a notable development in retirement planning for New Jersey workers. With automatic enrollment and contributions made directly through payroll deductions, it simplifies the process of setting aside funds for retirement.

The program requires businesses that have been in business for at least 2 years and have 25 or more employees to either offer a plan or certify an exemption, so it’s important for New Jersey employers to familiarize themselves with the program details and requirements.

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