New York State Secure Choice Savings Plan Legislation

Ithaca New York Pay Transparency Law Effective September 1, 2022:

“The City of Ithaca will require employers to disclose the minimum and maximum pay in every job posting, starting September 1. The new city ordinance applies to any employer with more than three permanent workers based in Ithaca. That could also include employers of certain Ithaca-based remote workers.”

New York State Secure Choice Savings Plan Legislation

In late 2021, new legislation was signed into law, requiring private employers who do not sponsor a retirement plan to automatically enroll their employees into the State’s new program.  The New York State Secure Choice Savings Plan (Program). The savings plan is an IRA program funded through payroll deferrals.  The plans are portable and can move from one employer to another if an employee change organizations. 

“Eligible Employers

The Program covers employers who have employed at least 10 employees in New York State at all times during the previous calendar year, that have been in business at least two years, and have not sponsored a qualified retirement plan for their employees in the preceding two years. Employers include all persons or entities engaged in a business, industry, profession, trade or other enterprise in New York state – including both for profit and nonprofit organizations. 

Employers are prohibited from terminating their own retirement plan in order to join the Program, and, to this end, the Program specifically excludes employers who have offered a qualified retirement plan in the prior two years. 

Eligible Employees

Eligible employees will be automatically enrolled into the Program, with a deferral rate of 3%, and may change this rate at any time (subject to rules set by the Board). Participating employees will be able to make elective deferrals up to the maximum limits under Internal Revenue Code (Code) Section 219 ($6,000 + $1,000 catch up – although catch up contributions are not mentioned in the statute). Employees who opt out may re-enroll again during an open enrollment period (at least once per year). 

Program Highlights

• Investment Options – The Program will contain various types of investment options intended to offer returns on employee contributions, with the long-term goal of utilizing these account balances to secure retirement income without incurring debt or liabilities to New York State. 
  • Default Investment Option. The Program will employ a default investment option that will take into account various factors, including cost, risk, benefit level and ease of enrollment. 
  • Other investment options under consideration include: a conservative principal protection fund; a growth fund; a secure return fund; an annuity fund; a growth and income fund; and a life cycle fund with a target date based upon factors determined by the Board. 
• Use of Third-Party Service Providers. The Program will contract with necessary service providers to offer retirement benefits, including investment managers, financial organizations, other financial service providers, consultants, actuaries, counsel, auditors, third-party administrators and other professionals as necessary. 
• Performance Reviews. Financial organizations’ performance will be periodically reviewed, including reviews of returns, fees and customer service, with reviews posted to the Program’s website. 
• Plan Administration Reviews. The Program’s enrollment process will be monitored, including such aspects as employee opt-in procedures, setting contribution rates, selecting investment options and termination of participation in the Program.
• Financial Education. The Program will facilitate education and outreach for both employers and employees.
• Disclosures. The Board will design and disseminate informational materials, which shall include background information on the Program as well as necessary disclosures as required by law. 
• In-Service Withdrawals. The Board will also consider withdrawal provisions (i.e., economic hardships, plan loans, portability, leakage). However, no such provisions will be available at inception. 
• Program Fees and Expenses. Program fees will initially come from New York state funds, but ultimately be paid out of future employee contributions. 

Required Disclosures

 Employers must provide employees with informational materials, including a disclosure form explaining many facets of the program, addressing: 

• the benefits and risks associated with making contributions to the Program; 
• the process for making contributions to the Program; 
• how to opt out of the Program at any time; 
• the process by which an employee can change the contribution rate from 3%; 
• that employees are not required to participate in the Program or contribute more than 3%; 
• the process for withdrawal of retirement savings;
• the process for selecting beneficiaries of their retirement account;
• how to obtain additional information about the Program; 
• an advisory informing employees to contact financial advisors for financial advice, as employers are not liable for investment decisions;
• information on how to access any available financial literacy programs; and
• a notice that the Program fund is not guaranteed by the State. 

Employers must also provide a form to employees allowing them to elect to either opt-out or select a deferral rate other than 3%. 

As a matter of first impression, these forms and disclosures appear to be similar to those associated with qualified retirement plans, such as a summary plan description. The Board will develop informational materials for use by employers. 

NYS Secure Choice Savings Plan vs. NYC Retirement Security for All Act

Earlier in 2021, Mayor DeBlasio enacted the New York City Retirement Security For All Act (NYC Act), which contained similar provisions to the Program, but was limited to New York City employers. Some of the key differences between the two legislative packages are:

There are a number of unanswered questions related to the current law and requirements for small organizations.  Continue to monitor for any upcoming changes and changes to the law.  Now is the time review options and implement an IRA, 403b or 401k option for your workforce.  November 2022 will be here soon.  I’m happy to work with any organization on specific questions related to the mandatory changes in NYS and NYC.