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Empire State Poised to Enact Mandatory Auto-IRA Program

State Auto-IRA Plans

The New York State legislature has taken another big step toward enacting a mandatory auto-IRA program. 

The State Senate voted 44-19 on June 7 to approve NY A03213-A, legislation that would convert the existing New York state secure choice auto-IRA saving program from being voluntary to mandatory for private sector employers that do not offer a retirement plan and employ 10 or more employees. 

The legislation is now cleared for the signature of New York Gov. Andrew Cuomo (D).

The New York General Assembly passed the bill on May 11 by a vote of 125-22. The legislation was sponsored by Assemblyman Robert Rodriguez (D) and Sen. Diane Savino (D) in their respective chambers. 

The legislation amends the existing law to establish the new parameters for making the program mandatory. The program’s board will be charged with evaluating and establishing 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 will be required to have a payroll deposit retirement savings arrangement to allow each employee to participate in the program no later than nine months after the board opens the program for enrollment.

In addition, participating employers will 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 will be auto-enrolled with a 3% contribution rate, but 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 sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p) or 457(b) of the Internal Revenue Code in the preceding two years.

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

The Secure Choice program will help extend access to approximately 2.5 million private sector employees who work for companies that do not currently offer a retirement savings plan and have 10 or more employees, according to a statement by AARP New York State Director Beth Finkel. 

On May 11, New York Mayor Bill de Blasio 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. 

According to the Georgetown University Center for Retirement Initiatives, there are now 13 states and two cities that have adopted some form of a retirement savings programs for private sector workers, and nearly 20 more that are considering legislation or are studying the issue. 

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