Auto-IRA Bill Passes New Jersey State Assembly
The bill, passed by the state senate earlier this year and now awaiting Gov. Phil Murphy's signature to become law, would establish IRAs for private-sector employees without access to workplace retirement plans, FA Magazine writes.
New Jersey firms with 25 workers or more that don’t have a retirement plan would be forced to set up automated payroll deductions for their workers, with the proceeds deposited into so-called Secure Choice IRAs, as well as to provide their workers with information about their options in the program, according to the publication.
Failing to enroll in the program or to deposit the workers’ contributions in the IRAs would expose the companies to financial sanctions, FA Magazine writes. But employers participating in the program would not be deemed fiduciaries on the plans, according to the publication. That’s because their employees would be enrolled in IRAs rather than defined contribution plans, FA Magazine writes.
Workers, meanwhile, will be able to opt out whenever they choose and will be put into life-cycle or target-date funds by default. However, they'll have the option to change their investment strategies, with no more than five investment options being offered, FA Magazine writes.
Democratic Assemblyman Roy Freiman, one of the bill’s sponsors, says in a statement that the goal of the bill is to ensure more employees save for retirement, as only 5% of employees consistently do so without an automatic payroll deduction, according to the publication.
Meanwhile, Oregon, California and Illinois are all working on similar IRA programs, FA Magazine writes.