Back in 2018, New York State legislators created the New York State Secure Choice Savings Program. This program was originally a voluntary retirement savings program that allowed private employers and nonprofit employees to have contributions automatically deducted from their paychecks.
In October 2021, Governor Kathy Hochul signed into law an amendment that now requires all private employers to automatically enroll employees into the program to help those who do not already have an employer-sponsored retirement plan save for their own retirement.
In this article, we will cover everything you need to know as a private employer to make sure you are in compliance with the new law.
What Is the NY Secure Choice Savings Program?
This program entails an automatic payroll deduction to be put into an individual retirement account (IRA). These accounts will be managed by the program’s board who will select the investment options on behalf of the employee. Until each program has sufficient funds to cover the cost of the program, the state will cover any administrative costs associated with creating and managing this program.
Participating employees may select a contribution amount. For employees who do not opt out or who do not designate a contribution amount, 3% of their wages will automatically be deducted. Money that is deducted will be after income taxes have already been taken out.
Who Does This Apply To?
This law applies to any nonprofit or for-profit organization that meets the following criteria:
Employers do not offer a qualified retirement plan including, but not limited to, a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b). This also includes employers who haven’t offered them for the last 2 years.
Employers have at least 10 employees in the state at all times over the previous calendar year.
Employers have been in business for a minimum of 2 years
Employers who meet all three of these criteria are required to participate in the program. Additionally, employers who already offer an employer-offered program cannot terminate their existing plan to participate in the program.
While employers are required to enroll employees if they meet the above criteria, employees may choose to opt-out of the program. If they wish to enroll later, they will need to wait until an annual open enrollment period.
Finally, the program covers any employee 18 or older who works in New York State. This applies to all employees no matter how many hours the employee works as it is open to both full-time and part-time employees.
What Are the Employer’s Responsibilities?
All responsibilities of employers are strictly administrative. If the employer meets the above criteria, they have to:
Distribute information regarding the program to all employees
Enroll each employee that does not opt-out into the program
Set up participants with an automatic payroll deposit retirement savings arrangement
Manage the contributions
All employers are shielded from liability when it comes to benefits paid and investment returns since they are not considered fiduciaries under the program. The sole responsibility for these issues falls on the New York Secure Choice Savings Program Board as they are solely responsible for designing and operating the program.
What Comes Next?
If you are an employer in New York State, you’ll need to keep up-to-date on when the program will be open for enrollment. Once this occurs, all employers will have 9 months to set up the payroll deposit system.
Keep an eye out for any updates on when this law begins to take effect with Complete Payroll’s up-to-date blog. We will keep you informed of any updates or new regulations that have taken effect with the program.
DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.
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