NJ law alert: Your employer needs to offer a retirement plan

Does it seem impossible to save for retirement? You may soon have a new option.

Signed by Gov. Phil Murphy in 2019, a law set to take effect in March forces employers to get the ball rolling on offering a retirement savings plan for their employees.

Typically a perk offered by large companies, a retirement plan will be required of employers that have been in operation for at least two years and have 25 or more workers, under the law. The law's initial implementation was pushed back a year, to Mar. 28, 2022, due to the coronavirus pandemic.

So, those qualifying businesses who don't yet offer a program such as 401(k) have to choose whether they want to go with the state-sponsored program created by the law, or another plan, and offer their workers a perk that must include automatic payroll deduction.

Through the state-sponsored plan, employees' funds would be diverted to an individual retirement account (IRA). The standard deduction for employees who participate would be 3%, but workers can change the amount.

"We've seen that people are much more likely to save for retirement if they can do so in a workplace plan," said Eric Phillps, a senior director at Human Interest, a retirement benefit provider for small and medium-sized businesses.

Noting that most of the U.S. workforce is employed at a small workforce, Phillips cited a "growing crisis" related to retirement savings — one that New Jersey's law aims to address.

New Jersey is one of more than a dozen states with a law that makes some type of retirement plan mandatory. Dozens more have programs under consideration.

"There's a countrywide notice of this situation and everybody's trying to do something about it, which I think is really great," Phillips said.

Dino Flammia is a reporter for New Jersey 101.5. You can reach him at dino.flammia@townsquaremedia.com

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