As Congress and the Department of Labor (DOL) still keep the status of open multiple employer plans in legal limbo, individual states are still going ahead with state-run programs.
New Jersey has become the sixth state to pass legislation requiring that certain employers offer to employees a state-sponsored individual retirement account (“IRA”) program with automatic enrollment and pre-tax payroll deduction contributions.
Employers will be subject to the NJ Auto-IRA Law and required to automatically enroll their employees in the program if they:
- Employed no fewer than 25 employees at all times in New Jersey in the prior year;
- Have been in business for at least two years; and
- Have not offered a qualified retirement plan (e.g., a 401(k) plan or 403(b) plan or a plan sponsored by an employee leasing company or professional employer organization that the employer has used in the preceding two years).
State-run programs have been around for a few years and my belief that unless they have a mandatory requirement like this one from New Jersey, they won’t catch fire in terms of gathering employers and assets because I believe that employers and employees are wary of government getting involved with retirement savings (like Social Security).
By forcing employers to join this IRA program, it may incentivize New Jersey employers to sponsor their own plans or join a multiple employer plan to avoid having to join this IRA program.