Retirement Security for All Act: New York’s State Retirement Mandate

What is the New York retirement savings mandate?

As of October 2021, New York state became the latest state to require private sector employers to provide their employees with a retirement savings plan.

Employers must offer employees a retirement savings plan if they meet these criteria:

• You employ at least 10 people within the state of New York, and
• You’ve been in business for at least two years.

How to comply with the state retirement plan mandate.

If your business currently offers a qualifying plan, all that’s required is that you register with the state of New York to show you’re in compliance.

If your business does not offer a plan you have two choices:

1. Start a qualifying plan
2. Register to use the New York State Secure Choice Savings Plan

The following plans may qualify for the state mandate.

• 403(a), 403b
• 401(k) plan
• 408(k) SEP
• 408(p) SIMPLE
• Payroll deduction IRA with automatic enrollment

The penalty for not complying with the mandate.

If a business fails to comply, the penalties are hefty:

• 1st offense – $250 per uncovered employee.
• 2nd offense (within 2 years) – $500 per uncovered employee.
• Subsequent offenses (within 2 years) – $1000 per uncovered employee.

How most employers comply with the mandate.

The vast majority of businesses in New York comply with the retirement mandate by starting a retirement plan through a private company.

Finding the right retirement plan for your company.

The most common plans are 401k’s and IRA’s.

401k plans

These plans were created fifty years ago as a supplement to a pension. Today they’re getting mixed reviews from both employers and employees due to the legal risks, costs and administrative complexities.

Employers offering a 401k plan are a fiduciary to their employees and can be sued for fiduciary mismanagement.

Here are four basic actions necessary to create a 401(k) plan:

– Adopt a written plan.
– Arrange a trust fund for the plan’s assets.
– Develop a record keeping system.
– Provide plan information to participants.

IRA, through payroll

Offering an IRA through payroll removes the cost, complexity and fiduciary risks from the employer and delivers an easy to use, flexible plan to employees.

The Payroll Deduction IRA is probably the simplest retirement arrangement that a business can have. No plan document needs to be adopted under this arrangement.

– Only employees make the contributions.
– Any size business can provide the plan.
– There is no testing or filing requirements.
– All workers qualify.
– No fiduciary responsibility for the employer.

New York State Secure Choice Savings Plan

• This is a payroll IRA so your annual contribution limit is $6,000 for 2021 and 2022 if you’re under the age of 50. Aged 50 or older? You can contribute up to $7,000 a year.
• Your employer will automatically enroll you in this retirement savings plan and if you don’t choose another contribution amount, 3% of your wages will automatically be deducted from your paycheck and contributed to your account.
• You can opt out of this plan at any time.
• If you opt out, you can only opt back in during the next open enrollment.
• You will have to read the plan literature to choose the investment options that are inline with your investment and savings strategies.