The bill (A-4275) was introduced by Assembly Speaker Vincent Prieto and Assemblymen Tim Eustace and Joseph Lagana. Modeled after the first-in-the-nation plan recently signed into law in Illinois, the bill would establish the “New Jersey Secure Choice Savings Program” to create a retirement savings plan for private sector workers in the form of an automatic enrollment payroll deduction IRA.
The program would apply to companies with at least 25 employees that have been in business for at least two years and have not offered a qualified retirement plan in the preceding two years. Smaller employers with less than 25 employees may participate in the program, but would not be required to do so.
Under the bill, qualifying employees would be asked whether they want to contribute 3% of their salary to a retirement account. Unless they decline to enroll, that percentage would be deducted from their pay and go into an IRA.
The bill also would create the “New Jersey Secure Choice Savings Program Fund” from funds received from enrollees in the program. The fund would be used exclusively for the purpose of paying benefits to the enrollees, for the cost of administration of the program, and for investments made for the benefit of the program.
Governing Board
The bill would create a seven-member board that would implement the program, establish a process for enrollment, and oversee the fund. The board would include:
- the state Treasurer, Comptroller, and Director of the Office of Management and Budget, or their designees;
- two public representatives with expertise in retirement savings plan administration or investment, or both, one of whom would be appointed by the Senate President and one of whom would be appointed by the Assembly Speaker; and
- a representative of participating employers and a representative of enrollees, both of whom would be appointed by the governor and subject to the advice and consent of the Senate.
Information Packets
The bill would require the board, prior to the opening of program enrollment, to design and disseminate to all employers an employer information packet and an employee information packet. The packets would include background information on the program and appropriate disclosures for employees. The employee disclosure form would explain:
- the benefits and risks associated with making contributions to the program;
- the mechanics of how to make contributions to the program;
- how to opt out of the program;
- how to participate in the program with a level of employee contributions other than three percent;
- the process for withdrawal of retirement savings;
- how to obtain additional information about the program;
- that employees seeking financial advice should contact a financial advisor, that participating employers are not in a position to provide financial advice and that participating employers are not liable for decisions employees make pursuant to the law;
- that the program is not an employer-sponsored retirement plan; and
- that the program fund is not guaranteed by the state.
Contributions and Investments
Employees would have the ability to select a contribution level and an investment option, and could change those choices quarterly, subject to rules promulgated by the board. If an employee fails to select a contribution level, that employee would contribute 3% of pay to the program. If an employee fails to select an investment option, that employee would be placed in the investment option selected by the board as the default investment option. Employees could terminate their participation in the program at any time in a manner prescribed by the board.
Enrollment
Following the initial implementation of the program, participating employers would have to designate an open enrollment period each year during which employees who previously opted out of the program could enroll.
The bill provides that the program must be implemented, and that enrollment of employees must begin, within 24 months after the effective date of the bill. No later than nine months after implementation of the program and the opening of enrollment, each employer covered by the bill must establish a payroll deposit retirement savings arrangement to allow its employees to participate in the program.
Annual Reporting
The bill requires the board to submit annually to the governor and the legislature an audited financial report and a separate report summarizing the benefits provided by the program, the number of enrollees in the program, the percentage and amounts of investment options and rates of return.
