Expanding New Jersey Workers' Access to Retirement Savings
As company retirement plans become mandatory for certain U.S. businesses, New Jersey's new retirement savings program kicks off this summer, giving more workers a way to save for retirement. But it's not the only option.
In recent years, state-mandated retirement plans have been rolling out across the United States to help small businesses offer their employees the chance to save.
Employers in New Jersey have long been in limbo regarding the timeline for its state-mandated retirement savings plan. Until now, RetireReady NJ has finally begun its phased rollout.
A smoother path to retirement readiness?
Originally named the New Jersey Secure Choice Savings Program, RetireReady NJ will help more NJ employers improve retirement readiness for their workers.
If they don't already offer a qualified retirement savings plan, every New Jersey employer with 25 or more employees will need to register with the program.
Those required to participate must automatically enroll their full-time and part-time employees unless the employee chooses to opt-out. The plan's 3% default contributions are made via automatic payroll deductions and are deposited into the participant's Roth IRA. Employers will not have the option to make matching contributions.
Keep in mind that there are penalties for businesses that don't participate or fail to enroll eligible employees. Employers that don't offer a plan within one year of eligibility will receive a written warning from the government. Each subsequent year of non-compliance will result in the following:
- Second calendar year: $100 fine
- Third and fourth calendar years: $250 for each violation
- Fifth and subsequent calendar years with a violation: $500 for each violation
Employers can certify their exemption to ensure that they're compliant with state regulations and avoid potential penalties.
Exploring options: Taking the private route
With the explosion of state retirement plan mandates, more American workers will have the opportunity to ease financial concerns and save for the future. But businesses have another way to comply — by sponsoring a plan through the private market.
On one hand, government-run programs are generally a low-cost solution with few fiduciary responsibilities for employers. But they tend to have inflexible, one-size-fits-all designs and very limited fund choices.
Because they are Roth IRAs, maximum annual contributions are much lower ($6,500) compared to 401(k)s ($22,500), with no pre-tax savings. In addition, employers take on a heavy administration burden, from registering eligible employees and setting up payroll deductions to managing plan records and money movement within the plan.
A private plan generally provides more flexibility on plan types and features and less administrative headaches. It can be a valuable tool to help companies retain great employees while also providing employers with a tax break.
Important dates:
- June 30, 2024 – RetireReady NJ program launched
- September 15, 2024 – Deadline for employers with 40+ employees to start a plan
- November 15, 2024 – Deadline for employers with 25-39 employees to start a plan
As an employer, it's up to you to find a plan that best aligns with your business. Connect with an ADP retirement specialist learn more.
ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor.
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