New Jersey Senate follows General Assembly in approving Secure Choice bill

By: Robert Steyer

Published: January 7, 2016 - Pensions & Investments

The New Jersey Senate on Thursday approved a bill that would create a retirement savings program for private-sector workers who lack workplace retirement plans.

The Senate’s 30-6 vote on the New Jersey Secure Choice Savings Program follows the Dec. 3 approval by the General Assembly of an identical bill. The General Assembly voted 54-16. The legislation now goes to Gov. Chris Christie.

The Secure Choice program creates an automatic payroll deduction individual retirement account. The program will be managed by a seven-member board chaired by the state treasurer. The board will choose a series of investment options, and employees can change their investments at any time.

Employers will establish payroll deposit systems for employees who wish to participate in the program; employees may opt out. Workers may select a contribution level; if they don’t choose a specific amount, 3% of wages will be contributed. Employers are not required to make contributions.

The program must commence within 24 months of becoming law. The legislation covers private-sector employers with 25 or more employees that don’t offer a qualified retirement plan such as a 401(k), 403(b), 401(a) or 457(b). However, smaller employers can choose to join.

The program may not take effect “if the IRA arrangements offered under the program fail to qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the Internal Revenue Service Code,” according to an explanatory statement posted on the state Legislature website.

The program also will not become effective “if it is determined that the program is an employee benefit plan and (that) state or employer liability is established” under ERISA, the statement added.