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Empire State Moves Toward Mandatory Auto-IRA Program

State Auto-IRA Plans

New York State’s legislature is now looking at making its existing auto-IRA program mandatory.  

The state’s General Assembly on May 11 passed NY A03213A by a vote of 125-22 that would make the New York State “secure choice” auto-IRA program mandatory for private sector employers that do not offer a retirement plan and employ 10 or more employees. The legislation is now pending in the New York State Senate.

To be clear, the state currently has a voluntary program. This bill would amend the existing legislation to establish the new parameters for making the program mandatory. 

The program’s board would evaluate and establish the process for enrollment, including the process by which an employee may opt not to participate in the program, select a contribution level, select an investment option, and terminate participation in the program.

Participating employers would be required to have a payroll deposit retirement savings arrangement to allow each employee to participate in the program at most nine months after the board opens the program for enrollment. In addition, participating employers would be required to automatically enroll their employees who have not opted out of participation and deposit funds on behalf of employees into the program. Employees would be auto-enrolled with a 3% contribution rate, but, as alluded to above, they would have the option to choose a different level of contribution, in addition to being able to opt out. 

“Employer” for purposes of the program would be defined as a person or entity engaged in a business, industry, profession, trade, or other enterprise in New York state, whether for profit or not for profit, that: 

  • has at all times during the previous calendar year employed at least 10 employees in the state;
  • has been in business at least two years; and
  • has not offered a qualified retirement plan, including, but not limited to, a plan qualified under Code Sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p) or 457(b) in the preceding two years.

The legislation also includes a clause that would prohibit employers that offer retirement plans to employees from terminating such plans for the purposes of participating in the program.

In justifying the legislation, a background memo cites a 2012 report from Boston College that nearly 53% of U.S. households are at risk of not having enough money on hand for their retirement. It further notes that this bill aims to increase access and participation rates in the program by establishing automatic enrollment at little or no cost to employers. 

New York Mayor Bill de Blasio on May 11 signed the “Retirement Security for All” legislation, establishing a retirement savings program for private sector employers in New York City that do not offer a retirement plan. Unlike the state legislation, however, this legislation applies to employers that have five or more employees.