Following in the footsteps of several other states, the Empire State is moving forward with its own voluntary retirement savings program for employees who are not offered a plan through their employer.
At a March 30 press conference, Gov. Andrew Cuomo (D) announced that he had reached an agreement with the state legislature on a $168 billion fiscal year 2019 budget package that includes a provision establishing the New York State Secure Choice Savings Program (NYSSCSP).
The NYSSCSP will encompass a voluntary payroll deduction IRA to assist the estimated 3.5 million New Yorkers who have no access to a retirement plan through their employer. The program will be administered by a seven-member board and chaired by the state comptroller.
Participating employers will be required to establish a payroll deposit arrangement to allow employees to participate, with employers charged with automatically enrolling their employees in the program, unless an employee opts out.
Employers that participate will not have any liability for an employee’s decision to participate in or opt out of the program, and they will not be a designated fiduciary, bearing no responsibility for the administration, investment or investment performance of the program. As such, they also would not be permitted to make matching contributions.
Meanwhile, employees will be able to choose their contribution level up to the IRA deduction limit (currently $5,500 for workers under 50 and $6,500 for those age 50 and older), which they could change at any time, subject to the rules determined by the board. Employees not choosing a contribution level would be automatically enrolled at 3% of their wages to the extent their contributions do not exceed the IRA limits.
Investment options under the program could include a lifecycle target date fund, as well as a principal protection fund, a growth fund, a stable value fund and an annuity. The board could choose other options if deemed appropriate, and it will be charged with establishing a default investment option for enrollees who fail to elect an investment option, taking into consideration the cost, risk profile, benefit level and ease of enrollment. The board could change the option if it determines that it’s in the best interests of enrollees.
The legislation also outlines a lengthy list of fiduciary responsibilities and duties of the board, similar to ERISA’s duty of prudence. Among other things, it directs the board to annually prepare and adopt a written statement outlining the provisions associated with risk management, as well as conduct a periodic review of the performance of any investment vendors, including a review of returns, fees and customer service.
If all goes according to plan, New Yorkers without access to an employer-sponsored retirement plan could begin enrolling in the program in about two years, although the legislation does allow for an additional one-year delay if necessary.
