Recently enacted AB 4134/Chapter 56 establishes the New Jersey Secure Choice Savings Program, requiring employers of 25 or more employees that do not offer a retirement plan to automatically enroll employees in a state-run individual retirement account (IRA) program funded by payroll deductions. (Governor's news release.)

The IRA program begin must be active within 24 months after the Act's effective date of March 29, 2019.The yet-to-be-established New Jersey Secure Choice Savings Board may extend the implementation deadline by not more than 12 additional months. The program will be implemented in two phases based on the size of the participating employers.

The New Jersey program is modeled after the Illinois Secure Choice program that launched on November 1, 2018 (see EY Payroll Newsflash 2018-1967 for more information on the Illinois program). As in the Illinois program, an employer will be exempt from the New Jersey program if:

• It has fewer than 25 employees in New Jersey
• It has been in business less than two years
• OR
• It offers a qualified retirement plan to its employees

All New Jersey employees aged 18 or older, whether employed part-time or full-time, will be eligible to participate in the program. The default payroll deduction rate will be 3% of wages, unless an employee designates a different percentage or opts out of the program.

Ernst & Young LLP insights

New Jersey joins seven other states — California, Connecticut, Illinois, Maryland, New York, Oregon (the first state to implement its plan, in November 2017), and Vermont — that have enacted similar legislation.

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EY Payroll News Flash