New York City Enacts the Retirement Security for All Act
By: Adam T. Hoffman
On May 11, 2021, New York City enacted the “Retirement Security for All Act” (Bill Nos. 888-A and 901-A). The law establishes a retirement savings program for private employers with five or more employees if those employers do not otherwise offer employees a retirement plan, such as a 401(K), 403(B), or defined benefit pension plan.
The legislation, which notes that 40% of New Yorkers near retirement age have less than $10,000 saved for retirement, requires New York City employers to automatically enroll eligible employees in an individual retirement account (IRA) program, deposit funds into the program for each enrolled employee, and distribute information to employees. (Note that this new law does not impact employers that currently have 401(K) plans or defined benefit pension plans in place). The program will be funded with deductions from employees’ wages, and employers are not required to contribute to the plan. Eligible employees include those who are at least 21 years old and work at least 20 hours per week, and the default employee contribution rate is 5%, which employees can adjust up or down, or opt-out of at any time, up to the annual IRA maximum of $6,000 (or $7,000 if age 50 or above). Additionally, the plan will be portable, so when employees switch jobs they can continue to contribute or roll over their accounts into other retirement savings plans.
Employers will be subject to certain penalties for violation of the law, beginning with a fine of up to $250 for an initial violation and a fine of up to $500 for a second violation within two years of the prior violation. The penalty increases to a fine of up to $1,000 for any subsequent violations within that two-year window.
The new law also establishes a Retirement Savings Board, which will consist of three members appointed by the Mayor, to facilitate the implementation of the retirement security program. The Board’s tasks will include, among other things, determining the start date of the program, entering into contracts with financial institutions and administrators, minimizing fees and costs associated with the administration of the program, creating a process for those not employed by a covered employer to participate, and conducting education and outreach to employers and employees. The Board will also work with the NYC Comptroller to select the investment strategies and policies.
The law will technically take effect on August 9, 2021, but the Board has two years to complete the process outlined above and implement a formal start date for the program. While the Board has yet to announce a formal start date, New York City employers that do not have current retirement plans for their employees should begin to familiarize themselves with the new law and keep up to date on information released by the Board.
For more information on the Retirement Security for All Act, contact the author of this post. Subscribe to this blog to receive email alerts when new posts go up.