NJ Secure Choice Savings Program Awaits Governor’s Signature

All that stands between a bill establishing the New Jersey Secure Choice Savings Program and its becoming law is the signature of New Jersey Gov. Phil Murphy (D).

The state Assembly passed the bill, which calls for the establishment of a state-run retirement savings plan for private-sector employees whose employers do not offer a retirement plan, on Feb. 25. Previously the bill was approved by the state Assembly on Dec. 17, 2018, and by the state Senate on Feb. 21.

The program, which entails automatic enrollment payroll deductions into IRAs, applies to private sector employers with 25 or more employees that do not offer a plan. It is optional for employers with fewer than 25 employees; they may, but are not required to, provide payroll deduction retirement savings arrangements for each employee who elects to participate in the program. Employees may opt out of the program.

The measure creates the New Jersey Secure Choice Savings Program Fund which will consist of funds received from enrollees in the program and participating employers, and is separate and apart from all public money or funds of this state. The amounts deposited in the fund shall not be state property. It also creates the New Jersey Secure Choice Savings Board to implement the program and oversee the fund.

Under the terms of the bill:

• participating employers will not have any liability for an employee's decision to participate in, or opt out of, the program or for the investment decisions of the board or of any enrollee;
• are not considered to be fiduciaries of the program;
• do not bear responsibility for the administration, investment or investment performance of the program; and
• are not liable regarding investment returns, program design, or program benefits.

However, the bill also provides that employers which, without reasonable cause, fail to enroll employees who have not opted out of participation in the program will be penalized and subject to:

• for the first calendar year during which at any point a violation occurs, a written warning by the department;
• for the second calendar year during which at any point a violation occurs, a fine of $100;
• for the third and fourth calendar year during which a violation occurs, a fine of $250 for each employee who was neither enrolled in nor opted out of participation in the program; and
• for the fifth and any subsequent calendar year during which point a violation occurs, a fine of $500 for each employee who was neither enrolled in nor opted out of participation in the program.

In addition, under the legislation an employer that collects employee contributions but fails to remit any portion of the contributions to the fund shall be subject to a penalty of $2,500 for a first offense, and $5,000 for the second and each subsequent offense.