The NJ Secure Choice Savings Program
On March 28, 2019, Governor Murphy signed legislation passing the New Jersey Small Business Retirement Marketplace Act that requires employers to automatically enroll their employees in the New Jersey Secure Choice Savings Program (SCSP) if they do not already offer their employees a 401(k) or any other qualified retirement plan. The SCSP requires employers to establish a payroll-funded IRA savings plan for employees who are enrolled in the Program. Employee enrollment in the SCSP started at the end of March 2021. Employers must enroll their employees in the Program by the end of 2021.
Employers must participate in the Secure Choice Savings Program if they meet the following criteria:
Are a profit or non-profit employer
Have employed 25 or more workers during the past calendar year
Have been in business for at least two years
Do not offer their employees the ability to participate in a qualified retirement plan such as a 401(k) or 403(b) plan
How will this work?
All employees included those who work part-time, are eligible to participate in the SCSP. Employees will be automatically enrolled and contribute 3% of pre-tax income, up to $6,000 ($7,000 if 50 or older), into the SCSP through a payroll deduction, unless they opt-out. The SCSP does not allow for employer contributions to the plan.
I’m an employer. What do I need to know?
First, employers must inform their employees about the SCSP. This includes providing new employees enrollment packets within 30 days of hire. Employers must also track the eligibility status of their employees and if any of their employees have opted out of the SCSP.
If any employees do not opt-out within 30 days of notification and are eligible for the SCSP, then the employer MUST set up a 3% payroll deduction. Additionally, an open enrollment period must be allowed for the SCSP every two years. Employers must also auto-enroll any employee who has not participated for at least one year and track those employees. Lastly, an employee census will be required to be submitted annually to the NJ Secure Choice Savings Program.
What if I do not comply with the SCSP?
In the first calendar year, non-compliance with the SCSP will result in the receipt of a written warning from the State of New Jersey. If non-compliance with the SCSP continues into a second year, the employer may be fined $100 for each employee who is not enrolled in the plan and has not opted out. In years 3 and 4, if an employer is still not in compliance with the SCSP, the fine will increase to $250 for each employee who is not enrolled and has not opted out. If an employer still does not comply with the SCSP by year 5 and beyond, the employer may be subject to a $500 per employee fine for each employee who is not enrolled in the SCSP and has also not opted out.
Additionally, employers that collect employee contributions, but do not deposit the contributions to the SCSP will be subject to a penalty of $2,500 for the first offense, and $5,000 for each subsequent offense.
We at HFA understand that the above can be overwhelming for employers. Never hesitate to give us a call and our team will assist you in navigating through this new program.