NY Retirement Savings Mandate: What Long Island Employers Need to Know

If you employ people in New York State, you've likely heard about the retirement savings mandate. This requirement affects most employers who don't already offer a retirement plan, and understanding it is crucial for staying compliant while supporting your employees' financial futures.

What Is the NY Retirement Savings Mandate?

The New York Secure Choice Savings Program requires most employers to either offer their own retirement plan or participate in the state-run program. Think of it like workers' compensation insurance—it's designed to ensure all employees have access to retirement savings, whether their employer traditionally offered benefits or not.

The program creates a payroll deduction IRA for employees, automatically enrolling them unless they opt out. It's essentially a safety net that ensures workers can save for retirement even if they work for smaller companies that historically haven't offered 401(k) plans.

How the Program Works

The mechanics are straightforward. Eligible employers must either demonstrate they offer a qualified retirement plan or register for the state program. Once registered, the process follows these steps:

• Employees are automatically enrolled at a default contribution rate
• Workers can change their contribution amount or opt out entirely
• Payroll deductions go into individual Roth IRAs managed by the state's vendor
• Employees own their accounts and can take them when changing jobs

The state handles the investment management and account administration. Employers simply process payroll deductions and remit funds—similar to how you handle tax withholdings.

Why This Benefits Your Business

While compliance is mandatory, many Long Island employers find the program offers unexpected advantages. First, it levels the playing field for recruiting. Medical practices and accounting firms that couldn't afford complex 401(k) plans can now offer retirement benefits alongside larger competitors.

The program also improves employee retention. Workers who are saving for retirement through payroll deduction are more likely to stay with their current employer rather than job-hop. This stability is particularly valuable for professional service firms where training new staff is expensive and time-consuming.

Additionally, because the state manages the program, you avoid the administrative burden and fiduciary liability that comes with traditional retirement plans. There are no employer contributions required, no complex compliance testing, and no annual filing requirements.

What Employees Gain

From your employees' perspective, automatic enrollment removes the biggest barrier to retirement saving: getting started. Many workers, especially younger ones, intend to save but never take that first step. The program does it for them.

The accounts are portable, meaning employees keep their savings when they change jobs. This is particularly important in today's job market where people change employers frequently. Unlike some employer plans, there's no vesting schedule or waiting period.

Because these are Roth IRAs, contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. This can be advantageous for workers who expect to be in higher tax brackets later in their careers.

Key Considerations for Implementation

Before implementing the program, consider how it fits with your existing benefits strategy. If you already offer a 401(k) or other qualified plan, you're exempt from the mandate. However, some employers choose to evaluate whether the state program might be simpler and more cost-effective than their current plan.

Communication with employees is crucial. While the program is designed to be simple, workers will have questions about contribution rates, investment options, and how it affects their taxes. Clear, ongoing communication helps ensure employees understand and appreciate this benefit.

You'll also want to update your payroll systems and processes. While the mechanics are straightforward, any new payroll deduction requires coordination with your payroll provider and potentially updates to your employee handbook.

How Benton Oakfield Simplifies Compliance

Navigating retirement plan mandates while running your business can feel overwhelming. That's where our compliance expertise becomes invaluable. We help Long Island employers understand their obligations, evaluate their options, and implement solutions that work for their specific situations.

Our team stays current on regulatory changes so you don't have to. We can help you determine whether you're exempt from the mandate, assist with program registration, and provide ongoing support to ensure smooth implementation. More importantly, we help communicate these benefits to your employees so they understand and appreciate what you're providing.

Ready to ensure your business is compliant with New York's retirement savings requirements? Contact us today to discuss how we can help you navigate this mandate while supporting your employees' financial futures.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This guide is for educational purposes only. Please contact your Benton Oakfield representative to discuss how this applies to your specific situation.

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