NY Governor Signs Law Mandating Auto-IRA Program for Some Workers

In November, New York Governor Kathy Hochul signed legislation passed by the New York legislature in June, whereby private business enterprises must enroll employees in the state auto-IRA program if the business itself doesn’t offer a retirement plan. Unless employees opt out, businesses must enroll them in the state program. The measure (S.5395-A/A.3213-A) is effective immediately and automatically enrolls employees in the state Secure Choice Savings plan unless they exercise their right to withdraw.

Auto-IRA programs are government-run initiatives that direct portions of employees’ paychecks into an IRA. Oregon first established a state-run auto-IRA program in 2017, with six other states — California, Colorado, Connecticut, Illinois, Maryland, and New Jersey — following suit.

In a sponsor memo, Sen. Diane Savino, D-Staten Island, stated that the law’s purpose is “to create a self-sufficient retirement savings program in the form of an automatic enrollment payroll deduction IRA, and establish an administrative board responsible for promoting greater retirement savings for private-sector employees in a convenient, low-cost and transferable manner.”

Savino and four other state Senate Democrats sponsored the legislation. “Part of ensuring that New Yorkers are financially stable is guaranteeing they have a reliable retirement plan,” Hochul said in a press release Thursday. “This legislation allows all workers to have a sense of relief and security when it comes to retirement.” 

Savino gave thanks to Hochul for signing the amended Secure Choice program. 

“Everyone thinks that when they are 22 or 23, they aren’t going to be 52 or 53, they always think they have time to save for retirement,” Savino said. “Secure Choice will provide private-sector employees with an automatic, portable vehicle for retirement savings that will help ensure income security in retirement.”

This legislation amends a 2018 New York law that authorized the New York State Secure Choice Savings Program. This voluntary retirement plan automatically transfers a portion of employees’ paychecks into individual retirement accounts.

Another change to the 2018 law is that it specifies what qualifies as an “employer.” The new law states that employers are entities that have had at least ten in-state employees in the past year and have been open for at least two years but have not provided employees the option of enrolling in retirement plans during such time.

The law also mandates employers to create a payroll deposit arrangement within nine months after the program opens. Contributions from employees’ paychecks will not be directed into IRAs until 30 days after they enroll. Any employee who opts out but later changes their mind may sign up during an annual open enrollment period.

The legislation further provides that employers who already sponsor a retirement plan may not terminate their programs in order that their employees may join the New York state program.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

 

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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