The New York State Secure Choice Savings Program (SCSP) was enacted in 2018, but as of January 2024, there is still no clear mechanism in place for private sector employers with 10 or more employees to enroll their employees in the program. Though the bill that created the Secure Choice Savings Program went into effect in October 2021, officials have yet to finalize the program and begin its implementation.
Still, it’s important for New York businesses to keep tabs on any program updates, including when enrollment opens for the program. However, if you are doing business in the Empire State and hearing about the New York State Secure Choice Savings Program for the first time, it may be helpful to have an overview of what’s on the horizon.
In this employer’s guide, we’ll sum up what this retirement program is, what it entails, who will be required to offer access to it once it becomes active, and if there will be any exemptions if a business already provides employees with the benefit of a retirement savings plan.
Does New York have a state-mandated retirement program?
In a nutshell, the New York State Secure Choice Savings Program is a retirement savings program that’s designed for the state’s private sector employees who are without access to a retirement plan from their employer. Though it is not yet active, the New York State Secure Choice Savings Program Board suggests that all private sector employers and nonprofit organizations actively monitor developments and announcements.
Why programs such as the New York State Secure Choice Savings Program are gaining traction
More than half of Americans polled in a recent Bankrate survey feel that they are moving in the wrong direction when it comes to putting money away for their post-work years. In New York State alone, two-thirds of workers in lower income brackets have neither a pension nor any money saved in a retirement account. Implementing a savings program could potentially help the more than 4 million private sector New York employees without retirement savings have access to a qualified retirement plan.
Now that we better understand why these types of plans are picking up steam, let’s find out which employers will be expected to offer it and how the savings plan will work.
Are employers required to offer the New York State Secure Choice Savings Program?
Simply put, once the savings program goes into effect, private sector employers that have been in business for at least two years and have a minimum of 10 employees will be required to auto-enroll employees. That said, should an employer already provide their employees access to a qualified retirement plan, participation is optional.
Plan details that employers should know
In a nutshell, the New York State Secure Choice Savings Program is a state-mandated retirement savings plan for New York employees. Employee contributions are made using automatic payroll deductions, with all funds placed in a Roth individual retirement account, or Roth IRA.
For those keeping score, there’s no cost to the employer for creating and managing the program. Though not yet active, when the program is up and running, employers will be required to do the following:
- Provide all employees with informational materials about the program
- Automatically enroll all employees into the program unless they choose to opt out
- Regularly deduct the specified contributions from the employee’s paycheck
- Manage all program contributions
The New York State Department of Taxation and Finance is tasked with overseeing both the development and implementation of the New York State Secure Choice Savings Program, according to Board regulations. As of January 2024, there are no deadlines in place, or a specific date targeted for program enrollment.
Let’s find out more about how this savings program got its start.
Is the New York State Secure Choice Savings Program a law?
The New York State Secure Choice Savings Program was passed by the state senate in June 2021. On October 21, 2021, Senate Bill S5395A was signed into effect by New York Governor Kathy Hochul.
The bill guarantees private sector and nonprofit employees the opportunity to invest in a qualified retirement plan by requiring employers to provide access to a Roth IRA. The bill requires that all private sector employers and nonprofit organizations that do not currently offer a qualified retirement plan participate in the program.
What type of plan will New York State Secure Choice Savings Program be when it’s active?
Simply put, employers with more than 10 employees will be required to have a retirement savings plan arrangement in place no later than nine months after the program opens for enrollment.
Do I have to offer the New York State Secure Choice Savings Program if I already offer a retirement savings program?
Only businesses that do not have a current retirement plan program in place must participate. If employers have a qualified pension plan or any of the following retirement plans in place, participation in the plan is not required:
- 401(k) – or other 401(a) plan
- 403(a) – qualified annuity plan
- 403(b) – tax-sheltered annuity plan
- 408(k) – simplified employee pension plan
- 408(p) – SIMPLE IRA
- 457(b) – governmental deferred compensation plan
Participation in the program is free for New York employers, with all costs absorbed by a one-time $4 million investment.
Registration and enrollment periods have not yet opened, so it’s a good idea for private sector employers to monitor the New York State Secure Choice Savings Program website for further updates.
More details employers and employees will want to know
- The plan is designed as an automatic payroll deduction program, with contributions automatically deducted from employee paychecks
- All employees will automatically be enrolled in the program with a default contribution rate of 3%, although employees have the choice to change the deduction percentage or opt out of the program altogether
- Employers are not able to contribute to the employee’s Roth IRA
- If an employer wishes to contribute to their employee’s retirement plan, they may want to sponsor their own plan
Are there any updates available about the New York State Secure Choice Savings Program?
Any employer that wishes to receive program updates from the Department of Taxation and Finance can sign up here.
Understanding the New York State Secure Choice Savings Program makes good business sense
Access to retirement savings can be a “win-win” scenario for both the employees who receive them and employers who offer them. Whether it is a state-sponsored plan like the New York State Secure Choice Savings Program or a partnership with a private insurance company, offering retirement savings can go a long way toward attracting new hires and retaining long-term employees. If you need assistance understanding the ins and outs of setting up a plan — or what the different options are — our team can help.