By Joseph M. Becht, CPA, CGMA, Senior Manager
In recent years, many states including New York have established programs to make it easier for businesses to provide retirement benefits and help employees save money for their future retirement. Due to a considerable number of individuals not having a retirement plan through their employer, New York State addressed this problem by passing a law in October 2021, establishing the Secure Choice Savings Program. The law says private-sector employers must provide retirement options if they employ 10 or more individuals in NYS at all times during the previous year; have been in business for at least two years; and have not offered a retirement plan to their employees in the previous two years. Eligible employees must be eighteen years or older.
How does it work?
The New York Secure Choice Savings Program automatically enrolls eligible employees in a Roth Individual Retirement Account (Roth IRA) and the contributions are taken from the employee’s paycheck. The employer is responsible for remitting the payroll deductions to a state approved Roth IRA and must provide Secure Choice information and documentation to employees. In addition, the employer must process employee enrollment elections. The standard default contribution rate is 3 percent. The account is portable, which means employees can keep contributing to their Roth IRA if they change jobs or move. Employees can decide the amount they want to contribute, and they can change their investment amount at any time. They can choose either a percentage of their wages, or a dollar amount up to the annual Roth IRA contribution limits. This flexibility empowers employees to save the amount that is right for them. Employees who are eligible to participate in the program will be automatically enrolled in the Secure Choice Savings Program, but employees are not required to participate. They can choose to opt-out at any time.
When does it go into effect?
The development of the New York Secure Choice Savings Program is still ongoing. However, the Secure Choice Board has been currently working to have a mandate go live before the end of 2025 and has already started a pilot program for selected employers to voluntarily try the program. Once the Secure Choice Board opens enrollment, covered employers will be required to set up payroll deposit Roth IRAs for their employees within nine months of that date.
Before the Secure Choice Savings Program goes into effect, employers who do not sponsor any type of retirement plans for their employees may want to determine if they will be subject to the New York State mandatory retirement rules. For further information regarding the New York Secure Choice Savings Plan, please visit securechoice.ny.gov.