N.J. Senate budget panel approves mandatory retirement savings plan

By Samantha Marcus | NJ Advance Media for NJ.com
December 23, 2015 at 1:30 AM - NJ.com

TRENTON — The state Senate budget committee has approved a bill creating a retirement program for private-sector workers without employer-sponsored plans in New Jersey.

The bill (S2831) would require companies with at least 25 employees that don't already offer retirement accounts to offer the "Secure Choice" retirement plan. Smaller companies with fewer than 25 employees can opt in.

The Senate Budget and Appropriations Committee on Monday cleared the bill with a 9-3-1 vote Monday. The legislation has already passed the state Assembly.

Like a 401(k), employers would set up a payroll deduction for employees, who automatically contribute 3 percent of their salaries, though they can adjust their contribution or opt out altogether, to an Individual Retirement Account (IRA). Employers do not have to match contributions.

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About 1.7 million people in New Jersey's workforce don't have access to an employer-sponsored plan, according to the AARP. And a U.S. Federal Reserve report has indicated that 31 percent of working Americans polled have no retirement savings.

The program, which would take effect within two years of its passage, would be administered by a seven-member board of officials from the governor's administration and appointees by the Senate president and Assembly speaker. Total investment and administrative fees could not exceed 0.6 percent of the fund balance, under the bill.

Although the fund would be state-administered, the money would not be guaranteed by the state. There would be no state contribution or employee match.

"The state shall have no duty to any party for the payment of any retirement savings benefits accrued by any individual under the program," according to the bill.

The New Jersey Business and Industry Association has said the mandate will "increase the cost of doing business, and suggested the program be entirely voluntary.

"We understand that there is a retirement savings deficit in New Jersey and support the idea of allowing businesses to set up automatic payroll deduction IRA programs for their employees," said Mike Wallace, the organization's director of employment and labor policy. "We believe, however, that these programs should be completely voluntary for employers and employees."

David Pascrell, an attorney representing the American Council of Life Insurers, cautioned against the startup expenses that could be borne — though possibly reimbursed — by the state and potential losses in income tax collections.

Sen. Steve Oroho (R-Sussex), who also prefers the program be entirely voluntary, said he's concerned about shielding employers from all liability, as well.

"I think we have the making of something that could be a good thing, I just think we could do it a little differently," he said.