The Retirement Landscape in New York, New Jersey, and Connecticut Is Changing: What Businesses Should Know

America’s retirement landscape is changing. Pensions are largely disappearing from the private sector, and the future of Social Security is unclear — making it difficult for many employees of small to medium-sized businesses to save for retirement. Many states have introduced state-sponsored retirement programs in response to the retirement savings crisis, including New York, New Jersey, and Connecticut.

Business owners are now tasked with deciding what kind of plan they want to offer their employees. It’s essential for businesses to understand how state-sponsored retirement plans work and if they are the right solution. Also, depending on the state, there could be significant complexities around complying with upcoming deadlines and avoiding penalties.

As a business owner in the New York City Tri-state area, you have options. Employers generally have an alternative to comply with state laws by offering a private 401(k) retirement plan.

Choosing a retirement benefits package

Employers have many options when choosing a retirement benefits package for their company, but offering a 401(k) plan has become the veritable gold standard. Here’s why:

• Around 88% of employees require access to a 401(k) from their prospective employer. Utilizing 401(k) retirement benefits can be a great tool to attract and retain talented employees.
• Retirement benefits are just as much an incentive as healthcare benefits.
• The SECURE Act tax credits make 401(k) plans less costly for small and mid-sized businesses.

It’s crucial to look for the best option for you and your employees to build your financial futures.

Around 88% of employees require access to a 401(k) from their prospective employer. Utilizing 401(k) retirement benefits can be a great tool to attract and retain talented employees.

Are state-mandated retirement plans necessary?

Not in every state, but the list of states that do require retirements plan is growing.

46 states have introduced legislation around requiring retirement plans, and 16 states and two cities have passed laws or have pending legislation outlining new programs for a state-sponsored retirement plan. As state mandates continue to roll out over the next few years, businesses must remain informed about deadlines to maintain compliance and avoid penalties.

How do state-mandated retirement plans in the Tri-state area work?

While New Jersey and New York’s state-mandated plans have yet to launch, Connecticut’s is already live. All 3 are structured around Roth IRAs, which can contrast greatly with a private 401(k) offering. Here are some of the differences:

• 401(k)s are pre-tax while Roth IRAs are post-tax
• 401(k)s have a higher annual contribution limit vs. Roth IRAs
• Roth IRAs have an income limit for participation, which restricts the savings potential for business owners and other Highly Compensated Employees

How are Connecticut, New Jersey, and New York impacted?

Find out each state’s requirements around state-sponsored retirement programs and employer registration deadlines.

Connecticut

Connecticut state law requires employers with 5 or more employees in business for at least 2 years to enroll their employees into the MyCTSavings plan if they do not offer a tax-qualified retirement plan. MyCTSavings is a state-sponsored auto-IRA designed to provide private-sector employees with greater access to retirement savings.  Employers that do not comply may be subject to penalties.

Connecticut employer registration deadlines

100+ employees: Deadline passed on June 30, 2022

26-99 employees: October 31, 2022

5-25 employees: March 30, 2023

New Jersey

New Jersey Secure Choice is a state-sponsored auto-Roth IRA that seeks to increase access to affordable retirement savings for private-sector workers. New Jersey is still working on implementation, but when it launches, companies with 25+ employees and have been in business for 2+ years must offer a retirement benefit. Once the program is up and running, any employer who fails without reasonable cause to enroll any employee who has not opted out of participation in the program within the time prescribed may be subject to:

• A written warning by the department for the first calendar year during which at any point a violation occurs.
• A fine of $100 for the second calendar year during which at any point a violation occurs
• A fine of $250 for each employee who was neither enrolled in nor opted out of participation in the program for the third and fourth calendar year during which at any point a violation occurs
• A fine of $500 for each employee who was neither enrolled nor opted out of participation in the program for the fifth (and any subsequent) calendar year during which at any point a violation occurs

New Jersey employer registration deadlines

25+ employees: Not yet announced

New York

Originally enacted in 2018, the Secure Choice Savings plan is an automatic enrollment payroll deduction Roth IRA retirement savings program created to help more New Yorkers save for retirement. Private-sector businesses with at least 10 employees who have been in business for at least 2 years must opt-in to New York Secure Choice or offer a qualified retirement plan. While implementation of the program appears to be moving forward, final details — including deadlines — are to be determined.

New York employer registration deadlines: To be determined

Which retirement plan is right for my company? State vs. employer-sponsored 401(k)

ensure your retirement plan provider integrates with your payroll and seamlessly handles other required administrative tasks.

Employers have options when choosing a retirement savings plan for their employees. The best place to start is by identifying what is most important to you and your employees. Knowing your options can help you establish the right plan for your business needs. While state-sponsored retirement plans may be easy to opt into, they often lack flexibility and control for employers — and have a much lower employee contribution limit than a 401(k).

Eligible employers may be able to claim a plan startup tax credit from the SECURE Act is up to $5,000 per year for each of the first 3 years, with an additional $500 credit per year for 3 years for adding an auto-enrollment feature to the plan. These credits can make launching a 401(k) plan more affordable than ever.

Help set up your business — and your employees — for success: ensure your retirement plan provider integrates with your payroll and seamlessly handles other required administrative tasks. Not only can starting an employer-sponsored plan with Human Interest offer eligible businesses tax incentives, but our partnership with TriNet Zenefits also creates additional opportunities to provide a comprehensive benefits package that we believe is essential to attracting and retaining talent.

Working with Human Interest and TriNet Zenefits

If you’re a small business owner interested in offering an employer-sponsored retirement savings plan, it’s crucial to decide what works best for you and your employees. We offer affordable, customizable plans that can satisfy the mandate in your state and allow you and your employees to save more each year.

As state mandates continue to roll out over the next few years, TriNet Zenefits and Human Interest are dedicated to helping small businesses remain informed about state-mandated deadlines to maintain compliance and avoid state-imposed penalties.

Register for our upcoming webinar, hosted by Zenefits and Human Interest, to learn more.

Human Interest is a full-service 401(k) and 403(b) provider that seeks to make it easy for small and medium-sized businesses to assist their employees invest for retirement.  TriNet Zenefits has a partnership with Human Interest and may be compensated if you hire Human Interest. For the full disclosures, visit this page.

This content has been prepared for informational purposes only, and should not be construed as tax, legal, or individualized investment advice. Consult an appropriate professional regarding your situation. Human Interest does not provide tax or legal advice. Investing involves risk, including risk of loss. Past performance does not guarantee future results.