Governor Christie recently signed a bill into law that will create a small business retirement marketplace. This new retirement savings plan offered by the state of New Jersey makes it optional for small businesses to participate, which is a big change from the bill the legislature sent to Christie’s desk.
The original bill passed by the legislature would have required businesses with more than 25 workers to sign on and make the plan available to any workers who wanted to contribute, or they would be fined as much as $500 per employee if they failed to enroll their employees.
Christie rejected the legislature’s plan and issued a conditional veto. A conditional veto means Christie can sign the bill later if it returned to his desk with recommended changes.
“I share the sponsors’ concerns for the financial future of the residents of New Jersey, but I believe that the approach taken by the Legislature — mandating participation under a threat of fines for not participating — is unnecessarily burdensome on small businesses,” Christie said in a note to lawmakers explaining his decision and outlining changes he would like to see.
The state Assembly voted on Tuesday, January 19 to cooperate with Gov. Chris Christie’s veto, just 12 hours after the governor handed down his conditional veto. However, many legislators aren’t happy with Christie’s changes and we expect to see the original bill reintroduced.
More information about the program:
- The governor’s proposal, which changed the name of the bill from the New Jersey Secure Choice Savings Act to the New Jersey Small Business Retirement Marketplace Act, will be entirely voluntary for both employers and employees and apply to companies with fewer than 100 employees.
- Contributions to the retirement fund will come from employee’s themselves, through a pre-tax payroll deduction similar to tax withholdings.
- It will create a panel of relevant state officials to select several commercial investment plans that private-sector workers can pay into to save for retirement. The initial proposal called for a seven-member panel made up of state officials, employers, and expert volunteers to create a new state-facilitated retirement plan.
- The vetoed bill would have limit investment fees paid by workers to 0.6 percent. Christie’s version will allow fees of up to 1 percent.
- The Christie proposal will have a minimum of two investment options: a myRA account — which is a type of Roth IRA sponsored by the U.S. Treasury and administered by Dallas-based Comerica Inc. — and a target date fund, which is a type of fund set up to meet investment goals by an expected retirement date.
- In the governor’s version, the state treasurer will be largely responsible for getting the savings program running; private investment companies, however, would manage the accounts. The participating firms will be chosen by the state treasurer or a designee of the state treasurer.
- At minimum, the marketplace must include a payroll-deferred individual retirement account and SIMPLE IRA. The marketplace must include these options for employers. Employers can choose whether or not to offer these options to employees. The marketplace will also include the federal MyRA program.
- Participating providers must include at minimum a target-date option and a balanced fund option, and participants cannot be charged more than 100 basis points of their total assets in annual fees.