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October 26, 2021

New York State Adopts Employer Retirement Plan Mandate

On October 21, 2021, New York State Governor Kathy Hochul signed legislation (S.5398-A/A.3212-A) requiring many private-sector employers to enroll their employees in a state-run retirement savings program. The new law also requires participating employers to auto-enroll their employees in the program. Employers must deduct 3 percent from each employee’s pay on a pre-tax basis and contribute that amount to a state-approved IRA for the employee, unless the employee opts out of payroll deductions. The new law takes effect immediately, but grants employers additional time to implement the program. 

The new law applies to all New York State employers that: (a) employed at least 10 employees in the state at all times during the previous calendar year, (b) have been in business at least two years, and (c) have not offered a qualified retirement plan (such as a  401(k), profit sharing, or pension plan) in the preceding two years. The law applies to both for-profit and not-for-profit employers.  

In 2018, New York State introduced its state-run retirement savings program, the New York State Secure Choice Savings Plan (Secure Choice), as a voluntary program. As originally enacted, employers could elect whether to enroll in Secure Choice. If an employer enrolled in Secure Choice, its employees could make tax-free retirement contributions through payroll deduction IRAs. The original program did not include an auto-enrollment feature.  

The new law makes Secure Choice mandatory for all employers meeting the requirements described above. The new law also mandates employee payroll deductions to the program, equal to 3 percent of pay, unless the employee affirmatively opts out of the program.  Employees may also elect a contribution percentage higher or lower than 3 percent of pay.

Secure Choice is administered by a board of state officials that includes the superintendent of the Department of Financial Services, the state comptroller, and the commissioner of taxation. This board is charged with establishing the enrollment process for employers and employees and the process by which an employee may opt out of the program. The new law provides that participating employers must set up payroll deposit IRAs for its employees within nine months from the date that the board opens Secure Choice for enrollment. 

The new law prohibits employers that currently offer retirement plans to employees from terminating those plans for the purposes of participating in Secure Choice.

On May 11, 2021, New York City Mayor Bill de Blasio signed similar legislation that applies to employers who employ persons within New York City. The New York City mandate applies to employers with five or more employees. 

If you have questions regarding the content of the alert, please contact Ray McCabe, partner, at; Art Marrapese, Employee Benefits Practice Area chair, at; or another member of the firm’s Employee Benefits or Labor & Employment Practice Areas.  

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