Compliance May 20, 2021

New York State Aims For Auto-Enroll Secure Choice Savings Program

Supporters say the yet-to-be-implemented Secure Choice Savings Program would offer a portable, payroll-deduction retirement savings option to millions of private-sector workers in the state.

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As the U.S. Congress contemplates ways to expand retirement plan coverage to more workers, various U.S. states are doing the same on a more local level, including New York.

Last week, the New York State Assembly passed a bill meant to strengthen the state’s fledgling Secure Choice Savings Program, advancing the legislation by a strong 121 to 26 bipartisan margin. Supporters of the bill, technically known as “A03213A,” say it will help millions of private-sector employees in New York state save for their retirement, making them more financially independent.

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Put simply, the proposal would ensure that private-sector employees are automatically enrolled into the Secure Choice Savings Program, and if they do not want to participate, they must opt out. For context, the New York state legislature approved the Secure Choice Savings Program back in April 2018, but the law made participation voluntary rather than automatic.

Among those voicing support for the bill and commending the lower chamber of the New York legislature for its passage is AARP New York State Director Beth Finkel. In a statement marking last week’s affirmative vote, she urged New York Senate Majority Leader Andrea Stewart-Cousins—and the full Senate—to pass the bill and Governor Andrew Cuomo to sign it.

“New York’s yet-to-be-implemented Secure Choice Savings Program would offer a portable, payroll-deduction individual retirement account [IRA] to many of the more than 3.5 million 18- to 64-year-old private-sector employees who work for companies that don’t already offer their employees a retirement savings plan,” Finkel says. “That’s over half New York’s private-sector workforce—with employees of color disproportionately lacking access to a workplace savings option.”

The legislative action in Albany, the state’s capital, is unfolding at the same time that New York City is revamping its own retirement savings offering. In fact, New York City Mayor Bill de Blasio just signed into law a proposal passed by the City Council that will create a new city-facilitated retirement savings program for private-sector employees. The city program will create a mandatory auto-enrollment IRA program for employers that do not offer a retirement plan and employ at least five people.

Notably, the state-level legislation would require companies with at least 10 employees, which now offer no way for employees to save for retirement, to facilitate workers’ participation through auto-enroll payroll deduction—unless the employee opts out.

“That would vastly increase participation,” Finkel suggests. “More than 2.5 million New Yorkers work for companies with at least 10 employees. And while people are 15 times more likely to save if they can do so through their workplace, they’re 20 times more likely if they’re automatically enrolled.”

Finkel and other supports of both the city- and state-level legislation say the new savings programs should be particularly beneficial for communities of color and other groups who have historically not enjoyed great access to the defined contribution (DC) retirement savings system.

According to an analysis published on JD Supra by Richard Loebl, senior counsel at Seyfarth Shaw LLP, signature of the bill would see New York joins three states—California, Oregon and Illinois—that have already established and operate such programs at the state level, whereby covered employers are required to auto-enroll employees in IRA retirement savings accounts.

The California program, CalSavers, recently prevailed in the U.S. Court of Appeals for the Ninth Circuit against a challenge that it was pre-empted by the Employee Retirement Income Security Act (ERISA). As Loebl explains, the primary bases for this decision are that the program is not run by a private employer and that employers maintaining ERISA retirement plans are exempted from coverage by the program (hence, there is no interference with an ERISA plan).

Compliance May 19, 2021

Complementary ‘SECURE 2.0’ Legislation Introduced in Senate

The introduction of the Improving Access to Retirement Savings Act could be a key step toward eventual passage of retirement reforms that build on the momentum of the SECURE Act.

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A bipartisan trio of senators has introduced a bill called the Improving Access to Retirement Savings Act, which, among other goals, would extend new retirement plan choices to nonprofit groups and expand/clarify incentives to encourage small businesses to offer plans to their employees.

The legislation parallels, but does not exactly match, the Securing a Strong Retirement Act, a piece of legislation which was recently introduced in the House of Representatives and which received a unanimous affirmative vote from the House Ways and Means Committee. Lawmakers in the House have taken to calling that bill “SECURE 2.0,” recognizing how it builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

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Sponsors of the Improving Access to Retirement Savings Act include Senator Chuck Grassley, R-Iowa; Senator Maggie Hassan, D-New Hampshire; and Senator James Lankford, R-Oklahoma. The trio says their bill provides common sense, bipartisan solutions that will help address the challenges and obstacles that continue to inhibit adequate savings and make it difficult for people to manage their incomes during retirement.

Passage of SECURE 2.0 in the full House and passage of the Improving Access to Retirement Savings Act in the Senate could lead to a reconciliation process that would eventually see a compromise piece of legislation become law. According to Paul Richman, chief government and political affairs officer at the Insured Retirement Institute (IRI), the chances for bipartisan retirement reform taking place this year now appear even greater. 

“Congress continues to signal strong, bipartisan interest in improving retirement savings opportunities and lifetime income choices for workers and retirees,” Richman says, citing two key provisions of the new bill.

First, he explains, the bill would encourage nonprofit organizations to offer employee retirement benefits by providing those groups with the same access to pooled employer plans (PEPs) that the SECURE Act offered to small businesses. Second, the bill clarifies when a small businesses can use a tax credit to help facilitate offering retirement plans to their employees if they join a multiple employer plan (MEP) or PEP.

“This clarification will encourage more small businesses to offer a retirement plan and facilitate greater use of MEPs or PEPs as the means to provide that plan,” Richman says. “With the Senate and the House introducing comprehensive retirement security legislation, IRI urges both chambers of Congress to work together and quickly act to bolster retirement security.”

Another feature of the Improving Access to Retirement Savings Act allows for a grace period to correct reasonable errors committed by parties administering automatic enrollment and automatic escalation features when groups are enrolling in a MEP, provided they are corrected within nine and a half months of the end of the year in which the mistakes were made.

Commenting on the filing of the legislation, Grassley says the bill will help more Americans save for their retirement while also giving small businesses and nonprofits another avenue to invest in their employees’ future financial security.

“Government should be doing everything it can to help Americans save more of their own hard-earned money,” Grassley says.

“No American should have to worry about affording retirement after a lifetime of hard work,” Hassan adds. “That’s why I have joined my colleagues on both sides of the aisle in introducing this commonsense bill that helps expand retirement options.”

Lankford says the policies covered in the legislation will make it easier for employers to offer retirement plans, improve overall accessibility and encourage retirement saving for employees.

“By making sensible updates to the law, this legislation makes it easier for small businesses and nonprofits to offer plans and expand access, which gives Oklahomans the freedom to save more of their money for retirement sooner,” Lankford says.

Govtrack.us has published the full text of the proposed legislation here.

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