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New Jersey Secure Choice Savings Program

By MICHELE D. SLOCUM, CPA

February 3, 2022

Small businesses are an essential part of New Jersey’s economy, providing needed products and services and creating important employment opportunities. The Garden State ranks 11th in the number of small businesses within its borders, totaling just under 908,000 enterprises. In fact, 99.6% of companies located within the state are small businesses, accounting for 49% of the overall employment. Those with 20 employees or less constitute the largest share of small business employment of these companies.

Despite the numbers, employees of these companies are often unable to receive access to important benefits considered standard at large companies. One of the most glaring discrepancies is with retirement plans. Only 63% of businesses with 25-49 employees offer an employer-sponsored plan, meaning workers do not have access to one of the fundamental ways to build retirement savings.

The New Jersey Secure Choice Savings Program was passed to address this issue and requires businesses with more than 25 employees to participate in the state-sponsored retirement plan or have a qualified plan in place. As the compliance deadline approaches, let’s look at the Program’s key details.

Program Eligibility

Participation is mandatory for any New Jersey business or nonprofit organization with 25 or more employees, has been in operation for two years, and has not offered a qualified retirement plan in the past two years. Those that currently offer an employer-sponsored retirement plan are exempt from the requirement. It is important to note that those with more than 25 employees must enroll those at least 18 years old, work full or part-time, and receive a W-2. Those with fewer than 25 employees are not required to participate but are encouraged to do so.

Automatic Enrollment

There is an automatic enrollment feature with a default 3% of gross wages contribution rate, but employees can opt out as desired. The maximum contribution amount is $6,000 per year ($7,000 for those 50 and over), and since it is an Individual Retirement Account (IRA), it can be transferred should a change of employer occur.

Program Management

Once the plan is established, employers must follow a few steps to maintain compliance. Specifically:

  • Offer an open enrollment period at least once per year.
  • Enroll new hires within three months of hire date.
  • Communicate program information.
  • Deposit employee payroll deductions.
  • Submit an annual employee census.
  • Fees for the accounts will be paid by the employees.

Effective Date

When initially passed in 2019, the effective compliance date was March 28, 2021, but was extended one year due to the COVID-19 pandemic. As a result, affected companies need to begin implementation starting on March 28, 2022, with a timeframe of nine months to complete the process. An additional 12-month grace period will be provided as needed. At this time, an official schedule has yet to be announced.

Non-Compliance Penalties

Those that fail to comply with program requirements may be subject to fines. Initially, a written warning will be sent from the state. If a business is still not in compliance, penalties will be assessed in the following year. In the second year, the fine is $100 per employee, 3rd and 4th year $250 per employee, and 5th year and beyond $500 per employee.

The New Jersey Secure Choice Savings Program ensures that employees of small businesses have access to a retirement savings plan and was signed into law to close the gap in retirement savings for New Jersey workers.

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If you have questions about the information outlined above, or to learn more about how Klatzkin can help with a retirement-related issue, click here to contact us. We look forward to speaking with you soon.

©2022 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.

About the Author

Michele is a Manager focused on serving the tax planning, reporting, and compliance needs of real estate, professional service and nonprofit organizations. She enjoys working to find tax-saving opportunities, many created through tax reform, including Section 199A deductions, bonus depreciation, and capital gains deferral through investment in Qualified Opportunity Zones.    Going beyond the expected...

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