Last year, New York State joined an ever-increasing number of states requiring certain employers to offer employees a retirement savings plan or enroll in the applicable state program. Specifically, the New York State Secure Choice Savings Program (“NY Secure Choice”) offers a retirement savings program in the form of an automatic payroll deduction IRA (similar to a Roth IRA) that allows employees to opt out of participation. New York State employers, whether for profit or not, having at least ten employees in the State at any time during the preceding calendar year, who have been in business for at least two years and have not not offered a qualified pension plan within the last two years, are subject to the participation requirements of NY Secure Choice (“Applicable Employers”).
The requirements for affected employers to enroll in NY Secure Choice went into effect on December 31, 2021 with no clear mechanism to do so. In addition, it was also expected that a formal action would be issued to repeal the New York City Retirement Security Act – a different law – as it essentially addresses the same portion of employers as the NY Secure Choice program, but it hasn’t been done yet. occurred. Now, the implementation of NY Secure Choice appears to be moving forward.
On January 26, 2022, the Board held its first meeting, adopted by-laws and delegated its authority and responsibility for the development and implementation of the program to the Ministry of Taxation and Finance (the “Ministry”). The minutes of the meeting also indicate that the Department will issue a request for proposals on behalf of the Board of Directors to recruit a consultant to assist in program design and future procurement development for the administration of the NY Secure Choice program. and investment management. In particular, under the regulations, no member, employee or agent of the board shall be liable for any loss or deficiency resulting from particular investments selected for the program, except for any liability arising from a breach of fiduciary duty, and they shall be entitled to defense and indemnification in accordance with Section 17 of the Civil Servants Act. However, it is not clear which investments will be selected for the program, or how they will be monitored.
In light of these developments, affected employers should:
Follow the start of the registration period. Payroll deposit arrangements to participate in the program will be required within 9 months of official program opening guidelines.
Ensure that they provide employee disclosure materials and disclosures, which will be developed by the Board or its designee, to their current employees at least one month before the relevant employer facilitates access for their employees to the program, as well as to new employees upon hiring.
Track potential legal challenges to ERISA preemption. A challenge to CalSavers — a similar law — failed. It remains to be seen whether further ERISA preemption challenges will ensue asserting that those state programs that can indirectly influence an employer’s decision to implement an ERISA plan would have sufficient influence to create a nexus. ineligible with an ERISA plan.
Consider the pros and cons of various approaches, including sponsoring their own plan, issuing requests for proposals for service providers and investment advisors to help manage a plan, or perhaps consider whether a pooled employer plan approach is desirable.
Concerned employers who act now will be able to keep pace with the implementation of the NY Secure Choice program and be well positioned to take the course best suited to their organization.
©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC All rights reserved.National Law Review, Volume XII, Number 37