Charles Rosenberg covers the high points of what advisors and employers need to know now about “New Jersey Secure Choice.” (4 minutes)
We are gonna discuss the New Jersey secure choice program. It is timely that we talk about it today because It is scheduled to be adopted at the end of 2021. At the latest we’re looking at early 2022. I’d like to cover some discussion topics that you can talk about with your clients so that they’re better equipped to make the right decisions whether they want to adopt this program or not.
Does this apply to all companies in New Jersey?
So the New Jersey secure choice program applies to any employer in the state of New Jersey that has twenty five or more employees, including part time employees that are on payroll.
How is NJ Secure Choice like / not like a 401(k)?
So it is similar to a 401(k) plan that it is a salary deferral arrangement.
But it is different than a 401(k) plan because this program is set up as an IRA type of program where the maximum you could put away is $6,000 a year. We are a 401(k) plan, a participant in to put away $19,500.
How much “choice” does an employer have with NJ Secure Choice?
There is no flexibility with this program since it is all employee money that’s going into it. So no plan design specifications or accommodations can be done here. We just set it up as an employee deferral. People put in their money and there is no customization as far as who can go in, how much they can go in for, who we can exclude. Everybody has to be included here.
Who chooses the investments in this program?
The investments that are available in the program are only the ones that are vetted by the state of New Jersey, those are the ones that are available on the program. In a typical 401(k) plan, the advisor would choose the investment choices available in the 401(k) program. So very different on the investment front, the state plan versus the a typical 401(k) plan.
Which companies are a good fit for NJ Secure Choice?
In my opinion, employers that wanna offer something for their employees and really don’t wanna get involved in any matching or any employer contribution. This is a great fit for them because there’s zero cost to set it up, the zero cost to administer.
But any employer that wants to do anything customized, this is absolutely not a good solution for them.
What does INTAC recommend?
At Intac, we recommend our clients to do a customized qualified retirement plan. The cost to set it up and administer is minimal versus the benefit that the employer and the employees get from the customization of a plan. And they can put away significantly more money for retirement, and most of our clients are looking to provide a meaningful benefit to their employees and that’s what a customized retirement plan would do for them.
What’s the best way to approach this with a client?
The best way to evaluate is really talk to your client and see where their head is with regard to what they wanna do for their employees.
If they are of the opinion that they just wanna offer a program and it could be limited in nature, then I would suggest looking at the New Jersey secure choice program. However, if they wanna do something meaningful even a small match for their employees, they definitely wanna consider doing a customized program.
A note of perspective…
I think the New Jersey secure choice program is giving employers an opportunity now to really reevaluate their benefit program for retirement for their employees.
And this is an opportunity where they’re gonna be forced to provide either a state run plan which is gonna be very limited and not give them a lot of flexibility or something that’s completely flexible very customized and not a significant cost involved. Happy to help, feel free to reach out to us.