New York City Mayor Bill de Blaise has signed legislation into law requiring that private employers provide employees with a retirement savings plan. This law will apply to most employers with five or more employees who do not already provide a retirement plan.
This new law will establish an individual retirement account (IRA) program for New York City employers with at least five employees who do not already offer a retirement plan. This IRA will automatically enroll such employees and deduct the money directly from payroll. The default contribution rate will be 5%; however, employees are free to raise or lower the rate or even opt-out if they choose.
As with any IRA, the contributions are limited to the maximum amount allowed by federal IRA requirements. This amount is currently $6,000 for individuals or $7,000 for those 50 years of age or older.
Employers are responsible for depositing funds as quickly as feasible into the employee’s IRA account as consistent with all IRA regulations. However, unlike many employer-provided retirement plans, this program does not provide for an employer to make contributions, nor does it appear New York City will either. The employee’s IRA account will be portable and follow them between jobs, and employers are free to roll them into other eligible retirement plans.
The IRA program will be overseen by a retirement savings board consisting of three individuals selected by the Mayor. This board will be responsible for:
This retirement savings board will work closely with New York City’s Comptroller in order to establish policies and select investments. They will also be responsible for reporting on the program on an annual basis.
This new legislation will establish penalties for employers that fail to comply based on both the number of employees affected and whether it is a repeat violation. There are also separate penalties for recordkeeping violations.
Civil actions may also be brought against employers for failure to enroll employees as well as for failing to pay employee contributions into the program on a timely basis.
However, employers will only need to comply within 90 days of when the board chooses to implement the program.
This means that employers need not take any immediate action, but they will need to be ready to take action when the program takes effect.