A law moving through the state Legislature aims to establish retirement accounts for private-sector employees who lack access to those plans.
Assembly Bill 4134, formally called the New Jersey Secure Choice Savings Program Act, would create an automatic payroll deduction for individual retirement accounts for employees without such a plan.
The Assembly Financial Institutions and Insurance Committee approved the measure by an 8-3 vote at its Monday meeting.
Any employer who has been in business for at least two years, has not had less than 25 employees in the last year and doesn’t currently offer a retirement plan would be required to participate. Smaller businesses could still voluntarily opt into the program.
“What we’re seeing more and more is that when companies do not offer automatic savings deductions, employees are less likely to save,” Assemblyman Roy Freiman, D-16th District and a bill sponsor, said in a statement. “Only 5 percent of employees save for retirement on a consistent basis without a payroll deduction.”
The automatic deduction for the plan would be at 3 percent, according to the text of the legislation. Employers could offer a retirement benefits package to their workers under the program.
Money from employee payroll deductions would go into a newly created New Jersey Secure Choice Savings Program Fund, which would be separate from any public money and not co-mingled with state funds. The funds are not employer-sponsored, the bill adds.
“Saving is a critical component of a worker’s future well-being. I know few people who have saved and wish they had not, but I know several people who haven’t saved and regret it immensely,” bill sponsor Assemblywoman Carol Murphy, D-7th District, said in a statement.
Under the measure, a seven-member board would oversee the fund and determine where to invest money; the enrollment and opt-out processes; how to select contribution levels and investment options; and which money should go towards investments or administrative costs.
The state treasurer, comptroller and director of the Office of Management and Budget would each appoint someone to the board.
The Assembly speaker and Senate president would each appoint someone with experience in managing retirement funds, while the governor would appoint a representative for employers and enrollees.
Under the bill, the program would have to be implemented 24 months after the governor signs it into law, after which employers would have nine months to set up the enrollment system.
From then on, employers would have three months after a new employee starts work to enroll them in the plan, unless they manually opt out.