A law has been passed requiring certain employers in New Jersey to provide retirement savings plans for their companies. It’s called the New Jersey Small Business Retirement Marketplace Act. In this article we’re going to discuss the terms of the mandate, how to know if you qualify, and what the employer’s options may be.
Before we get started, we are a financial advisor in Morristown, New Jersey. We have a specialty in working with NJ retirement savings plans such as 401(k) and 403(b) plans. Please take a moment to review these blogs before proceeding:
How to Comply with the 401(k) Nondiscrimination Test
5 financial tips for small business owners
7 ways to encourage employee participation in your 401(k) plan
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The New Jersey retirement savings plan mandate
So, you own a company in New Jersey with 30 or so employees. You’re buzzing along. The pandemic was rough but you somehow made it through.
And now…
You pull up the news one day and SMACK! You see a headline stating that all New Jersey employers are mandated to offer a retirement savings plan to their employees.
“Help!” you say.
Although the prospect can be daunting, the good news is that helping your employees save for retirement can be a wonderful thing, if you go about it the right way. We can tell you from our experience as a financial advisor helping companies in New Jersey with 401(k) etc., this can potentially work out very well.
But where do you start?
What is this New Jersey 401k law…thing???
The New Jersey Small Business Retirement Marketplace Act states that employers in New Jersey with 25 or more employees must have offered them a retirement savings plan by the end of 2021.
Here are some of the details:
- Applies to both non-profit and for-profit companies
- Pertains to companies with 25 or more W-2 (not 1099) employees on the payroll in 2021
- Only if you’ve been in business for two or more years
If you don’t offer them a company-sponsored plan such as a 401(k) or 403(b), then you must automatically enroll your employees in the New Jersey Secure Choice Savings Program, the state-sponsored retirement plan.
Companies who do not comply with the New Jersey Small Business Retirement Marketplace Act will have to pay fines.
Complying with the New Jersey Small Business Retirement Marketplace Act
All of that is great, you say, but what do I actually do?
To meet the requirements of the New Jersey Small Business Retirement Marketplace Act and by offering a qualifying retirement savings plan to your employees, you’ll have to:
- Educate employees about the offering by providing them with an information packet about the plan
- Conduct annual enrollment
- Enroll your current employees now, or within three months of hire (if new)
- Contribute 3% (or more, if they specify so) of each employee’s pre-tax salary into the retirement savings plan on their behalf
- Keep track of whoever opts out or opts in
- Hold an annual enrollment period after the program is up and running
- Meet ongoing compliance requirements related to the administration and operations of your company’s retirement savings plan
- Report tax information related to the plan on your New Jersey state return
What will all this cost me?
There is no cost to participate in the New Jersey Secure Choice Savings Program itself, but there may be administrative expenses incurred by other aspects of compliance.
If you are managing your plan in-house, our blog on 401(k) compliance delves into the subject of how to set up a retirement plan for your New Jersey business, some of the parties involved, and how to go about it all in a way that makes sense financially.
But I’m still scared of the New Jersey retirement savings plan mandate!
If complying with the New Jersey retirement savings plan mandate isn’t on your list of fun ways to spend your time, it may be a good idea to speak with someone familiar with how New Jersey employee retirement plans can be optimized for a positive employee experience.
We’re financial advisors in Morristown, NJ serving businesses across the country and are happy to offer any insights; please contact us.
Sources
Cole, Jeremy et al. (2021, October 28th). Goldberg Segalla. Reminder: Qualifying New Jersey Employers Must Enroll Employees in New Jersey’s Secure Choice Savings Program Before End of 2021. Retrieved from https://www.goldbergsegalla.com/news-and-knowledge/knowledge/qualifying-nj-employers-must-enroll-employees-in-secure-choice-savings-program-before-end-of-2021
(3 March, 2021). JD Supra. Most New Jersey Employers Must Provide Retirement Savings Programs Starting March 28. https://www.jdsupra.com/legalnews/most-new-jersey-employers-must-provide-1054733/
(3 March, 2021). Cg Tax, Audit & Advisory. NJ to Launch Mandatory Retirement Savings Program Next Month. https://www.cgteam.com/nj-to-launch-mandatory-retirement-savings-program-next-month/