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IRA Retirement Savings in New York: New Legislation and the Impact on Small Business Owners

By The Human Interest Team -

It’s not headline news that many Americans are struggling to save enough for retirement. However, a recent report from Certified Financial Planner Board reveals that half of adults are not saving for retirement.

When you combine the fact that fewer companies today provide pension plans to employees with those same workers living longer and needing to save more, the gap between work and retirement can seem like a chasm. In New York, about 4.3 million private-sector employees work for businesses that do not have 401(k) plans, pensions, or other retirement savings options, according to the New School for Social Research in New York.

To address the retirement savings gap, some state governments are focusing on new efforts to bolster retirement options and savings by establishing retirement programs for private sector workers whose employers do not offer a 401(k) or other retirement plan. Passed in 2018, New York’s $168 billion fiscal budget for 2019 added a provision for the New York Secure Choice Savings Program, a new, voluntary option to help more New Yorkers save for retirement using a Roth Individual Retirement Account (IRA).

The nuts and bolts of the New York Secure Choice Savings Program

Modeled after the state’s 529 college savings plan and designed for those who work at small businesses as well as freelancers and contractors, the New York Secure Choice Savings Program helps more businesses offer state-supervised Roth IRAs for employees as well as freelancers and contractors.

While many details remain undecided, a 10-person board will determine the program’s overall structure, contribution limits, communications, and outreach while overseeing the New York Secure Choice Program.

Here’s what you need to know

Presently, the plan entails the following, including the pros and cons of the program:

Simplifying the savings process for all

While the New York Secure Choice Savings Program is voluntary for both small businesses and workers, AARP research indicates that it will likely be popular: 74 percent of New York-based businesses without employee retirement plans were in support of such a privately managed state retirement savings option and Americans are 15 times more likely to save when they can do so through work. Further, the savings program was widely supported by the AARP, the legislature, and local business and employee groups.

Is this just in NY?

New York is not alone in its efforts to boost retirement programs for workers: Since 2012, more than 40 states have either implemented or studied legislation related to new government retirement programs. Created to make it easier for small businesses to offer retirement plans and for employees to benefit from them, the New York Secure Choice Savings Program legislation is expected to expand employee retirement savings statewide since 91% of employees will choose to save for retirement when they have the option of an automatic payroll deduction, according to client data from Vanguard (versus just 60% for plans that offer voluntary enrollment).

Employers have options

Rather than Secure Choice, an employer could offer another type of retirement savings plan to their employees instead. Want to learn more about low-cost, retirement savings plans designed to match the needs of small and medium-sized businesses? We’re here to help.

The Human Interest Team The Human Interest Team

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.

Small and medium businesses can be prepared, too.

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Human Interest - The 401(k) provider for small and medium-sized businesses

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