Private companies with 25 or more employees who have been in business two or more years are required to register for the state’s RetireReady NJ program unless they already have a qualified retirement savings plan for their workers, the state announced this week.
NJBIA is offering its members an alternative to the state-run plan. The NJBIA retirement solution allows businesses to join a Multiple Employer Plan (MEP) that can access customizable fiduciary-managed retirement plans for their employees.
James O’Donoghue, a chartered retirement plan specialist with BCG Securities, recently held an online NJBIA seminar to explain how the NJBIA retirement solution for private employers is an option for businesses looking for alternative to the state-run plan – or just want to compare how their existing retirement plan stacks up to what NJBIA offers.
The state launched a pilot RetireReady NJ program this spring with five private employers, which gave 250 workers the ability to save for their retirement through payroll deductions into a Roth or traditional Individual Retirement Account (IRA). On Wednesday, the state Treasury Department announced the program is now open for all employers, a move they hope will allow millions of private-sector workers to save for retirement.
While participation in RetireReady NJ is not required for businesses with fewer than 25 employees, those with 25 or more employees face financial penalties if they do not join the state-run plan or offer another qualified retirement savings program. After one year of non-compliance there is a $100 per employee penalty, O’Donoghue said. Employer fines rise incrementally in the years that follow and reach $500 per employee in Year 5, he said.
“You will have to start offering a 401(k) plan,” O’Donoghue stressed to business owners during the NJBIA online seminar. “They’re going to give you a few months before they start issuing penalties.”
There is no dispute that America has a retirement savings crisis. The AARP estimates that 20% of Americans over age 50 have no retirement savings at all, according to the Treasury Department announcement news release.
The state-run plan, administered by Vestwell State Savings, is designed to help workers bridge that gap if they don’t have access to a private pension plan, said Todd Hassler, executive director of the state’s Secure Choice Savings Program.
Under the state run-plan private-sector workers are automatically enrolled by their employers. If an employee takes no action within 30 days to customize their account, the default savings rate is 3% of the employee’s gross pay deducted from their paycheck after taxes and invested in a Roth IRA. However, employees can opt out of the state’s retirement savings program after they are automatically enrolled.
The NJBIA retirement solution has the advantage of allowing employers to match employee contributions to their retirement plan, which the state-run plan does not. NJBIA’s program also provides employers with more investment choices and a dedicated financial advisor to help set up employee meetings and answer workers’ questions to increase voluntary enrollment, O’Donoghue said. Additionally, employers can qualify for a three-year tax credit if they are part of the NJBIA plan that is not available under the state plan.
To find out more about NJBIA’s retirement solution, go here.
For more information about the RetireReady NJ state-run program, go here.
