The New Jersey Senate budget committee has approved a bill creating a retirement program for private-sector workers that are not offered employer-sponsored plans.
The “New Jersey Secure Choice Savings Program Act” would require employers with 25 or more employees that do not sponsor their own retirement plans to automatically enroll employees into a state-run program. Employees that do not opt out will automatically have 3% of their salary deferred into an individual retirement account (IRA), and can change the amount deferred, keeping in mind IRA contribution limits.
The bill would establish the New Jersey Secure Choice Savings Board, which will oversee the program. Language in the act describing the board’s duties is similar to that of the Employee Retirement Income Security Act (ERISA). The act says board members will discharge their duties “solely in the interest of the program’s enrollees and beneficiaries,” and will invest with “the care, skill, prudence, and diligence under the prevailing circumstances that a prudent person acting in a like capacity and familiar with those matters would use in the conduct of an enterprise of a similar character and with similar aims.”
The committee’s approval of the bill in New Jersey comes after the Department of Labor (DOL) issued proposed guidance for states that want to create such programs. The rulemaking has a particular focus on helping states bring such plans into alignment with the procedures and requirements of ERISA, and also offers potential safe harbor protections for states implementing auto-IRAs.
Other states have already implemented state-run retirement programs for private-sector employees, trying to close the retirement plan coverage gap. But, a study for the state of California and its Secure Choice Retirement Savings Plan found that while the majority of workers surveyed say such a program would be good for them, a significant number still would not save or save enough.