New York Mandates Workplace State-Based Retirement Savings Program

The New York State Secure Choice Savings Program (Secure Choice) is a state-sponsored program that seeks to tackle the retirement savings crisis by making available a payroll deduction IRA for an estimated 3.5 million workers who lack an employer-provided retirement savings plan.

Legislation signed into law in October 2021 makes participation mandatory for businesses with 10 or more in-state employees that have been in business for at least two years and don't currently offer a workplace retirement plan. They would be required to establish automatic payroll deposit plan within nine (9) months of the program's opening. This law takes effect immediately. The state legislature passed a bill in May 2021 that proposed converting the voluntary program for businesses.

New York joins such states as Oregon, California, Illinois, New Jersey, Massachusetts, Connecticut and others that have established their own state retirement programs in response to the country’s retirement savings crisis.

Originally established with funds from the state's fiscal 2019 budget, the provisions of the New York State Secure Choice Savings Program follow those in a number of state programs that are either currently operating or are scheduled to be implemented in the coming years. Key features of the program include:

• Mandatory participation for employers with 10 or more eligible employees at all times during the previous calendar year
• Roth IRA structure. Contributions are made on an after-tax basis. IRA deduction limits apply. Employers cannot make contributions to the plan.
• Automatic enrollment. Participating employers would be required to auto-enroll employees, although employees may choose to opt out. The automatic payroll deduction will be 3 percent of an employee’s paycheck.
• Limited employer involvement. Participating employers would not be considered fiduciaries, as their role is limited.
• State administration. The state comptroller is charged as chairperson of the program, which will be administered by a seven-member board.
• Investment options determined by the board. The proposal suggests a default investment of a target date lifecycle fund, with additional investment options noted as a conservative principal protection fund, a growth fund, a secure return fund, and an annuity fund, to be determined by the board.

New York City passed a law May 11, 2021 that established an auto-IRA program and mandates participation for businesses with five or more employees within the city limits. However, the city law had a provision that if New York state adopts a mandatory program similar to the city’s that the city program would merge with the state one. 

As developments with the New York State Secure Choice Savings Program continue to roll out, make sure that you stay aware of state retirement plan changes, key dates, and enrollment deadlines.

This article was originally published April 24, 2018 and previously updated on June 16, 2021.