Democratic lawmakers in New Jersey are pushing to establish a new auto-enrollment retirement requirement on small employers modeled on an approach set to rollout in Illinois in 2017.
As with the plans in the Land of Lincoln and those being considered by other states around the country, New Jersey taxpayers would not be asked to support the plan, but rather participants' fees would cover all administration costs.
Nor would the state be considered a fiduciary, meaning it would hold no liability over the performance of the investments offered in the plan.
Recommended For You
Assembly Speaker Vincent Prieto and Assemblymen Tim Eustace and Joseph Lagana introduced the New Jersey Secure Choice Savings Program last week.
Employers with 25 or more workers that don't already have a savings plan in place would be required to implement the state option.
Workers that did not choose an investment option within the plan would be defaulted into an alternative established by the plan's trustees at a minimum deferral rate of 3 percent, with the ability to opt out.
The fund would be overseen by a seven-member board, led by the state treasurer, and would receive all contributions, which would be used exclusively for paying benefits, the cost of administering the plan, and for "investments made for the benefit of the program."
"This is truly a win-win for employees and employers," said Prieto, who represents Bergen and Hudson countries. "Employees who would otherwise have no private retirement plan will now have access to one. And smaller companies will now have a great incentive tool to help recruit and retain employees without any financial burden."
Some experts, however, think the growing trend to establish state-administered retirement plans may be more costly to launch than expected, and may have negative unintended consequences.
Among them: small businesses that already offer plans may be encouraged to drop them, moving their employees into the state plans, which are likely to offer fewer investment options and may deprive workers of access to a plan advisor.
And "there could be substantial expenses for states and taxpayers in startup and ongoing administrative and compliance costs," said Jon Vogler, a senior analyst at Invesco Consulting, in an interview with BenefitsPro.
There is also the question of whether state plans would be subject to the Employee Retirement Income Security Act, and whether the Department of Labor will be eager to exempt the plans from ERISA oversight, said Vogler.
Among the required disclosures mandated in the New Jersey law, employees would be informed that the plan would not be considered an employer-sponsored plan, and that employers would not be liable for the plan's performance.
Enrollment would begin 24 months after the bill was made into law, and affected employers would be required to have their employees enrolled nine months after that point.
The Employers Association of New Jersey, a non-profit trade organization representing the state's private sector employers, is reportedly exploring the launch of its own retirement program aimed at attracting small employers that don't offer a plan, according to the association's website.
There are about 250,000 employers in New Jersey with 50 or fewer employees. All told, they employ about 1.5 million workers.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
