New York to Establish IRA-Based Private Sector Retirement Program

An amendment to New York’s state finance law has established an IRA-based retirement savings program for the state’s private sector employers and their employees. Full establishment of the program is envisioned within 24 months.

The New York State Secure Choice Savings Program is to be a Roth IRA-based program that complies with Internal Revenue Code requirements for Roth IRAs. The program is to cover employees age 18 or older who have compensation from an employer (either for-profit or nonprofit) engaged in an enterprise in the state of New York, an employer that has not offered a “qualified retirement plan” within the two prior years. “Plan” is to include such traditional qualified plans as profit sharing/401(k), money purchase, target benefit, and defined benefit plans, as well as 403(b), SEP, and SIMPLE IRA plans, and governmental 457(b) plans.

Employees will be offered an opportunity to contribute or to decline participation. If no election is made, employees would be automatically enrolled and contributions withheld from their compensation at a rate of three percent. Employees can opt out of participation at any time or may change their rate of contribution. Other provisions of the program as identified in the state’s finance law amendment include the following.

  • A governing Board is to choose available investments, with an initial default investment proposed to be a life-cycle or target date fund; future options to potentially include principal protection, growth, and “secure return” investment options.
  • Investments are to be pooled to take advantage of cost savings “through efficiencies and economies of scale.”
  • The Board would set minimum and maximum contributions consistent with Roth IRA rules, as well as determine withdrawal provisions.
  • Employers participating in the program will “begin employee enrollment at most nine months after the Board opens the program for enrollment.”
  • A website is to be established to provide information and enable participant transactions.
  • Communications with employees will be provided in eight specified languages, and others as “the state comptroller deems necessary.”
  • Deposits of amounts withheld from employee pay are to occur no later than the last day of the month following the month of withholding, and consistent also with an employer’s deposit requirements for income tax and unemployment insurance withholding.
  • There would be no New York state funding obligation or liability.
  • Employers would not be liable for employee participation decisions or governing board decisions.

The program’s governing board may delay implementation beyond the anticipated 24-month period if adequate funds to administer the program are not obtained. Funds for such administration can come from state, federal, or local government sources, as well as any individual, firm, partnership, or corporation.