Creates Automatic Payroll Deduction IRA for Employees Without a Retirement Savings Plan
Saving for the future is one step closer to becoming easier for some New Jersey workers. A bill sponsored by Assembly Democrats Roy Freiman, Raj Mukherji and Carol A. Murphy to establish the “New Jersey Secure Choice Savings Program Act” was released by the Assembly Financial Institutions and Insurance Committee Monday.
The bill (A-4134) would create an automatic enrollment payroll deduction Individual Retirement Account (IRA) for private sector workers without access to a retirement savings plan through their employer. It is designed to promote retirement savings for employees in a convenient, low cost and portable manner.
“What we’re seeing more and more is that when companies do not offer automatic savings deductions, employees are less likely to save,” said Freiman (D-Somerset, Mercer, Middlesex, Hunterdon). “Only 5 percent of employees save for retirement on a consistent basis without a payroll deduction.”
According to AARP:
-Over half (1.7 million) of New Jersey workers have no access to a retirement savings plan through their employers
-Nearly half of companies with under 500 employees do not offer a retirement savings plan
-The average Social Security benefit for a 65+ family is approximately $19,000 a year although, on average, older New Jersey families spend $23,000 a year on food, utilities, and health care alone.
Under the Secure Choice savings program, employers could easily offer their employees a retirement benefits package. Participating employers would simply need to establish a payroll deduction for their employees’ savings to be deposited into a Secure Choice IRA, and provide employees with an information packet about the different investment choices available through the program. Employees would be automatically enrolled in a default retirement savings program, but given several retirement savings strategies to choose from, as well as the option to opt out if they so choose. Employees are also allowed to change investment strategies or savings rate once per calendar quarter, should their financial circumstances change.
“A secure choice IRA is more flexible and can follow employees throughout their careers,” said Mukherji (D-Hudson). “It is not connected to a position, which can be temporary.”
“Saving is a critical component of a worker’s future well-being” said Murphy
(D-Burlington). “I know few people who have saved and wish they had not, but I know several people who haven’t saved and regret it immensely.”
The funds established by Secure Choice will be separate and apart of all public money and will not be comingled with state funds. In addition, since Secure Choice funds are not employer sponsored benefit plans, they will not be subject to Employee Retirement Income Security Act (ERISA) rules.