A brief history of retirement plans in the U.S. shows the first private pension plan was introduced in 1875 by American Express. This only covered a select few of the U.S. population. In 1937, the U.S. government passed the Social Security Act, providing even more coverage to the general population. However, social security was intended only to provide 40% of an individual’s monthly retirement income. When considering inflation, this is still not sufficient income for a retiree.
In 1978, the U.S. government introduced Deferred Compensation Plans in many forms. Currently, there are over 625,000 retirement plans in the U.S. Even though these plans collectively cover 67 million people, 46% of Americans still lack access to them. For NJ, this represents 1.6 million citizens without a savings plan. This was the inspiration for the passing of RetireReady NJ.
By adopting this plan, NJ joins 19 other states in assisting their citizens in saving for retirement. Forty-eight states and the District of Columbia either have plans in place or have considered legislation to establish state-facilitated retirement savings programs. Currently, South Dakota and Alabama are the only states that have not considered legislation.
Plan Overview
In March 2024, the state of NJ approved RetireReady NJ to assist its citizens in saving for retirement. This program is effective immediately.
RetireReady was created to help bridge the gap in retirement savings for NJ citizens. It is a state-administered program that allows employees to save for retirement through payroll deductions. The savings plan will follow employees to future employers provided they are registered and do not have a qualified retirement plan.
RetireReady NJ establishes a Roth IRA plan for all registered members who do not opt-out. The IRA is funded through individual employee payroll deductions and does not allow contributions from the employer. Once employers register, the state will contact the employees to explore their investment options or opt out of the plan.
The employer has no administration responsibilities beyond registering their employees and remitting contributions as the state of New Jersey administers the plan.
Ensure your business is fully prepared—access your copy of the RetireReady NJ FAQ Guide today and take the first step toward compliance.
Enrollment
This plan includes for-profit and not-for-profit employers. Employers with 25 or more employees at any time of the year, including full-time, part-time and seasonal employees, who do not have an established plan and have been in business for more than two years are required to enroll. If you received an access code, you are required to register for this program.
Employers with 24 or fewer employees can request an access code and preemptively request an exemption, but this is not required. Employers with 24 or fewer employees are unqualified to participate in this savings plan.
What Is Considered a Qualified Plan?
Qualified plans include SEP, SIMPLE, 401(a), 401(k), 403(a), 403(b) 408(k), 408(p) and 457(b).
Deadlines for registration are as follows:
Any employer who fails to comply (without reasonable cause or without an exemption) is subject to the following penalties:
- 1st calendar year – written warning by the department
- 2nd calendar year - $250 per employee who was not enrolled and did not opt-out
- 3rd and 4th calendar year - $250 per employee who was not enrolled and did not opt-out
- 5th and subsequent years - $500 for each employee who was not enrolled and did not opt-out
Who Is Included in the Employee Count To Determine Registration Deadlines?
- Employees over 18 years old who work in NJ and whose wages are subject to NJIT
- Full-time employees
- Part-time employees
- Seasonal employees
- Professional employer organizations
- Employee leasing companies
Exemptions
- If you already offer a qualified plan, you are required to register, then request an exemption. You will be required to provide the tax code of your plan (401(k), 403(b) etc.
- If you do NOT have 25 or more employees but received an access code, you must file for an exemption.
Is This Plan Eligible for Audits?
Currently, there are no planned audits for this program since it is facilitated by the state. However, compliance audits are possible if employers do not register new employees on time or remit payments in accordance with their pay schedule.
How Does This Benefit the Employer?
- Free to facilitate, the state does the heavy lifting
- Easy to setup via the online portal
- Minimal ongoing responsibilities
- Easily integrated into the payroll process
- Valuable tool when attracting, hiring and retaining employees
- Employer is free from fiduciary responsibilities – you will not be required to make any investment decisions about the plan
- There is no employer match
What Do I Need To Do?
The first step is to visit the employer portal and click on the yellow box entitled “Register your business” to register. You will need your company’s EIN and the access code sent via email or USPS. If you don’t have a code, don’t worry! There is a button that says “Don’t have your access code” that you can click to get the code. Once you receive the code, you will need to complete the 4-part onboarding flow which includes the following steps and items:
- Company Information (Legal Name and DBA)
- Company’s legal name, including any DBAs
- Company’s physical address
- Company phone number
- Company’s mailing address
- Payroll Setup – There is a drop-down menu for choosing your payroll provider. If your provider is not listed, choose other and enter your provider's name. If you don’t have a provider, select no provider. You will also need
- Pay Frequency
- Day of week
- Beginning date to start
- Payment Setup – add an account for automatic withdrawals (required)
- Add all employees
- Can be uploaded from a workbook or can be manually entered (template available in the help section)
- Fields needed:
- Social Security Number
- First Name
- Last Name
- Birthdate
- Address
- Add all employees
Note: you can invite another team member to assist with onboarding, so it is unnecessary to designate only one person to have access or complete the process in one sitting.
You will add ALL employees through communication with the state and during the 30-day grace period, those employees who do not want to participate will opt out. The employer is NOT responsible for this part of the program; it is between the state and the employee.
If you already have a qualified savings plan, you must take steps on the same website and choose the “certify your exemption” button. This is mandatory! If, at any time after registering for the program, you decide to offer a qualified savings plan, you should take steps to exempt your employees.
If a worker’s ITIN or SSN cannot be verified, they will not be entered into the program. New hires must be enrolled within three months of the hire date unless they opt out before enrollment.
I Registered – Now What?
Once you are enrolled, you will withhold contributions via payroll deduction and forward those contributions along with payroll records to the state of NJ. You will need to work with your payroll provider to ensure that contributions are processed correctly and in compliance with state-mandated guidelines and deadlines.
Employers are responsible for remittance of employee withholdings. Failure to remit withholdings will result in penalties ranging from $2,500 to $5,000 for each incident. You are also responsible for adding new employees and marking former employees as terminated.
The RetireReady NJ program marks a significant step in expanding retirement savings access for New Jersey residents. By understanding the program’s history, requirements and registration process, employers can ensure they meet their obligations effectively and contribute to their employees’ long-term financial security.
Authors: Michele D’Antonio | [email protected]; Rosemary Baker | [email protected]; and Michael Pahira, CPA, Principal | [email protected]
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