RetireReady NJ is one of the most recent state-mandated retirement plans to take shape. That is likely to be welcome news for those working in the state, as the American Retirement Association reports that one million New Jersey employees are currently without access to an employer-sponsored retirement plan.
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Fast Facts about RetireReady NJ
- Originally named the New Jersey Secure Choice Savings Program, registration for RetireReady NJ opened on September 15, 2024
- Participation in the program will be mandatory for employers with 25+ employees
- All employees at eligible businesses will automatically be enrolled when it begins
- There will be a small management fee for participating employees
- The plan is free for all employers to implement
The program was signed into law in 2019, and in April 2024, businesses with 25 or more employers were invited to sign up for the pilot launch. When the its officially up and running, it will require certain employers to enroll employees in the program, although all private sector employers can participate once it becomes active.
In this employer’s guide, we will discuss the program’s origins, who will be required to offer access once it becomes active, and if there are exemptions if a business already provides employees with access to a retirement savings plan.
Getting to know RetireReady NJ (formerly the New Jersey Secure Choice Savings Program)
In March of 2019, New Jersey Governor Phil Murphy signed P.L. 2019 c. 56, putting the wheels in motion for the New Jersey Secure Choice Act. Though it was originally slated to begin operations in March of 2021, the implementation was repeatedly delayed due to the Covid-19 pandemic.
Under the Act, the state has set up its own retirement fund, with employees automatically enrolled in the program. Now that the program is active, the following New Jersey employers are required to participate:
- Any private sector or nonprofit employer with at least 25 employees
- Any private sector or nonprofit employer that has been in business for at least two years
- Any employer who does not currently offer a retirement plan for their employees
There were two deadlines that passed in 2024 for employers:
- By September 15, 2024, employers with 40 or more employees employers were required to register
- By November 15, 2024, employers with 25 to 39 employees were required to register
Vestwell is the program administrator.
RetireReady NJ know-how: How does it work?
Simply put, employers that are required to participate once the plan is active will have to automatically enroll all of their employees, both full- and part-time, unless the employee chooses to opt out.
All contributions to the program are made by automatic payroll deductions, with 3% the default contribution level. However, employees will be given the option to change the contribution level once a year.
All contributions will be placed in a Roth Individual Retirement Account, or Roth IRA, which is fully portable. Therefore, the employee can take their retirement savings with them should they change employers. Employers are not permitted to match employee contributions to the Roth IRA.
Should employers participate in RetireReady NJ if they already offer a retirement savings program?
If an employer already offers a qualified retirement plan to their employees, they are not required to enroll in the New Jersey Secure Choice Savings Program. Qualified retirement plans include:
- 401(k)
- 403(b)
- Simplified employee pension (SEP) IRA
- Simple IRA
All program management fees will be paid by the State of New Jersey. Though employers will not be charged for maintaining the plan, employees will be charged management fees that have not yet been set but cannot exceed 0.75% in the plan’s first three years and 0.6% thereafter of the fund’s total balance.
Are employers required to offer employees access to a retirement savings plan in New Jersey?
If a New Jersey private sector employer or nonprofit meets the qualifications listed earlier, they will be required to participate in RetireReady NJ. However, other businesses that don’t meet all of the qualifications can voluntarily choose to participate in the program as well. For instance, even though they are not required by New Jersey law to do so, a business with fewer than 25 employees may participate in the program.
Considerations for companies regarding compliance
Please spare the messenger, as there can be some unwelcome outcomes if an employer fails to follow the RetireReady NJ program rules. There can be penalties for both a business that meets the requirements and chooses not to participate, or if an employer fails to enroll an eligible employee within the allotted period.
There is a schedule of potential penalties in C.43:23-31 of the Act that employers should be aware of.
- In the first calendar year, an employer violating the law will receive a written warning
- After this first notice, the stakes rise as in year two the warning can be followed by a $100 fine. From there, fines can increase in years three and four, reaching $250 for each employee who isn’t properly enrolled in the program.
- A fine of $500 for each employee who was neither enrolled in, nor opted out of, participation in the program for the fifth and any subsequent calendar year in which a violation occurs.
Finally, there can be an additional slap on the wrist for employers who collect employee contributions but fail to remit any portion of the contributions to the fund. In this case, there can be a penalty of $2,500 for the first offense, and $5,000 for the second and each subsequent offense.
More resources for employers
Employees and employers can both benefit from retirement benefits
Whether its through the RetirementReady NJ or a private provider, offering workers access to retirement savings be a “win-win” situation for you and your staff. Team members get the chance to save money for retirement while employers can use savings plans to attract and retain top talent. If you have questions about picking a retirement plan, the OnPay benefits team can help!
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.