On October 21, 2021, Governor Kathy Hochul signed legislation that took effect immediately requiring certain employers to participate in the New York State Secure Choice Savings Program (“CSP”). The legislation amends the New York General Business Law and applies to all for-profit and non-profit employers that employed 10 or more employees in calendar year 2020, have been in business for at least two years and have not offered a qualified retirement plan to employees.
The CSP is a retirement savings plan established in 2015 that is managed by a board of nine individuals appointed by the Governor. The board has the discretion to delegate oversight of the program, including its development and implementation as the board sees fit, to the State Department of Taxation and Finance (“Department”). The Department is expected to issue clarifying guidance and regulations regarding the program’s implementation. CSP funds are not guaranteed by the State and the law expressly exempts employers from liability for investment decisions made by the board and participating employees. Further, the legislation does not require matching funds from employers.
The board is required to draft and publish informational materials, including an election form, for employers to distribute to workers. These materials have not yet been published and the board has not yet opened the program for enrollment. Therefore, employers are not currently required to take any action. However, participating employers must establish a payroll deposit retirement savings arrangement that allows employees to participate in CSP no later than nine months after the board opens enrollment which is expected to occur in 2022. Also, once the board publishes informational materials, participating employers are required to provide them to employees at least one month before access to the program begins. Employers must also provide the materials to new employees at hiring.
The informational materials will include a form that allows employees to elect whether to participate in the program and, if participating, to determine their level of payroll contributions. If employees do not expressly opt out of the CSP or elect a different contribution rate, employers are required to automatically enroll employees at a rate of 3% which will be deducted from their paychecks. Deductions will not start until 30 days after the employee is enrolled.
Additionally, there will be an annual open enrollment period during which employees who previously opted out of the program may enroll. Employers who offer another qualified retirement plan such as a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p) or 457(b) plan are prohibited from terminating their plans to participate in the CSP.
Employers with questions about this new requirement or any other legal issues are encouraged to contact a member of our Firm’s Labor & Employment Practice Group.