What You Need to Know About New Jersey’s Auto-IRA Program

Legal Alert

April 29, 2019

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New Jersey passed the New Jersey Secure Choice Savings Program Act (the “Act”) on March 28, 2019, creating the Secure Choice Savings Program (the “Program”). Once the Program is up and running, certain employers that do not have qualified retirement plans will have to auto-enroll their employees that do not opt out in the Program.

Employers may be subject to the Act if they:

Employed at least 25 employees in New Jersey at all times in the prior calendar year;
Have been in business for at least two years; and
Have not offered a qualified retirement plan in the preceding two years.

The Program will be administered by the New Jersey Secure Choice Savings Board (“Board”), which is required to request an opinion or ruling from the U.S. Department of Labor regarding the applicability of the Employee Retirement Income Security Act (“ERISA”) to the Program. ERISA generally preempts state laws that relate to employee benefit plans.

The Board may not implement the Program to the extent that it is treated as an ERISA plan, or to the extent that it fails to qualify for favorable federal tax treatment as an individual retirement account (“IRA”).

New Jersey is the sixth state (following California, Connecticut, Illinois, Maryland, and Oregon) to create an automatic IRA program. Other states, including Washington and Massachusetts, are currently considering similar measures.

The timeframe for implementing the Program is within 24 months (by March 28, 2021), which may be extended by an additional 12 months if needed. The Program is designed to be implemented in phases, with large employers enrolling first.

If you have questions about whether an auto-IRA statute applies to your company and what you need to do to comply, please contact your Executive Compensation and Employee Benefits Counsel at Smith, Gambrell & Russell, LLP.